Remember those monthly child tax credit payments last year? Here's how it is going to affect your tax returns

Remember those monthly child tax credit payments from July through December last year? Many people don’t realize that those were not a gift from the government, they were actually advanced payments for your 2021 taxes.

Early last year, congress temporarily expanded the child tax credit for the 2021 tax year up to as much as $3,600 per child from $2,000. The government began paying half of the credit in advance, dividing it into monthly payments from July through December.

Thank you for supporting local journalism with your subscription.

“What they said was, “We’re not going to make you wait until (this) March or April to get your child tax credit in your tax refund; we’re going to go ahead give you half of it”. But now you have to tell us that you got it on your taxes,” said Bill Gilleland, coordinator of the volunteer income tax assistance program in Davidson County.

This mean some who received the monthly advance child tax credit payments in 2021 may get a smaller refund or owe money this filing season. Families who opted out of advance payments will receive the full amount of the credit when they file their 2021 tax returns.

But Gilleland said it may not make much of a difference in refund amounts because the government raised the 2021 child tax credit to $3,000 per child with no cap on the amount you can get back. In the 2020 tax year, there was a $1,400 limit on the $2,000 child tax credit refund.

This means if someone received a total of $1,500 in monthly payments from July to December, there may be $1,500 available to be refunded.

More: Keep on keeping on: Davidson County businesses get boost with over $200 million in PPP Loans

The most important thing is to look out for a letter, via traditional mail through the U.S. Post Office, from the IRS that will reconcile those advanced payments when calculating how much of the $3,000 child tax credit is eligible for refund.

Each individual, including married couples filing jointly, will receive a letter covering the total advance child tax credit payments received in 2021, and the number of qualifying children used to calculate amounts.

The IRS letter advises recipients to review their payments online at the agency’s child tax credit portal. Anyone who didn’t receive one or more of the payments listed is instructed to call the I.R.S. before filing a return.

There will also be a letter for each person with details about the economic impact payments, or stimulus money, from March which was not connected to the child tax credit. This lump sum payment is not taxable, but the letter is necessary to provide the IRS verification that the taxpayer received the money.

Because of this, and several other marked changes in the tax codes this year, the IRS has already stated it will take longer than normal to process tax forms and start making refund payments. They recommend filing taxes electronically and opting for direct deposit.

More: Volunteers needed for free income tax preparation program in Davidson County

Gilleland said it is vitally important to make sure you use the information in the letters sent by the IRS accurately when filing your taxes or it may seriously delay how quickly you get your tax refund.

“Just make sure you have your letters, so you get the right answer. If it's not right, the return will be sent by the IRS for error resolution and you may not see (a refund) until Christmas,” said Gilleland.

There are many free programs online to file state and federal taxes, such as MyFreeTaxes.com or find other sites at the IRS website.

The volunteer income tax assistance program, which fills out and files taxes for lower income families and individuals, is available in most counties. Information on how to make an appointment can be found online by area or calling your local tax office.

General news reporter Sharon Myers can be reached at sharon.myers@the-dispatch.com. Follow her on Twitter @LexDispatchSM.

This article originally appeared on The Dispatch: How monthly child tax credit payments last year will affect your tax returns