Have too much money for the Child Tax Credit in 2021? You may not have to pay it back

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Here’s some potential good news for taxpayers worried about owing money.

Key points

  • Many people received monthly child tax credit payments in 2021.
  • If you received more than you were entitled to, you may not owe the IRS any money.

Filing a tax return can be a time-consuming process. But this year, filers may have an additional issue to deal with: the child tax credit.

Last year, the child tax credit was beefed up as part of the US bailout, the massive relief bill signed into law in March. Before 2021, the child tax credit capped at $2,000 per child. Last year, that limit was increased to $3,000 for children 6 to 17 and $3,600 for children under 6.

Meanwhile, half of the child tax credit was paid in monthly installments that hit recipients’ bank accounts between July and December 2021. The remaining half of the credit can be claimed on 2021 tax returns, whether many people are preparing properly. now.

If you received more child tax credit money last year than you thought you were entitled to, you may be worried that you will now have to pay the money to the IRS. But that may not be the case.

Not everyone will have to pay

Last year, the child tax credit was available to single parents with an adjusted gross income (AGI) of less than $75,000 and married couples with an AGI of less than $150,000. From there, the credit gradually faded and was taken off the table for single parents with an AGI of $95,000 and married couples with an AGI of $170,000.

Since the Child Tax Credit was based on 2019 or 2020 income, not everyone may have received the amount they were supposed to. Some families may have received lower payments than they were actually entitled to, while others may have received more money.

If you were underpaid on the Child Tax Credit, you can claim the difference on your 2021 tax return, which is due April 18 this year. But if you were overpaid, that’s another story.

Fortunately, some groups are protected from having to repay the IRS. Married individuals filing jointly or filing as a qualified widow will not have to reimburse the IRS if their 2021 AGI is $60,000 or less. For those filing as head of household, that threshold drops to $50,000. And for single filers or married people filing separately, it’s $40,000.

Taxpayers with higher incomes last year may still benefit from partial overpayment protection. But that protection runs out at an AGI of $120,000 for married filers jointly and widowers, $100,000 for heads of households and $80,000 for single filers or those who are married and file separately.

What if you are not protected from a refund?

Even if you end up having to repay the IRS some of the child tax credit funds you’ve already received, that doesn’t mean you’re going to write a check. If you are entitled to a refund, the amount you owe can simply be deducted. Suppose you owe the IRS $500 of child tax credit, but the IRS owes you $800. In this case, you will simply get a lower refund.

Either way, keep an eye out for letter 6419, which will summarize your child tax credit payments for 2021. If this information does not appear to be accurate, be sure to check it against your records, as there have already been reports of some of these letters containing incorrect information.

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