The IRS blundered in several ways in its handling of child tax credit payments last year.
- Last year’s enhanced Child Tax Credit made millions of households eligible for monthly payments from July.
- While the IRS distributed this money to most recipients, 4.1 million people were ignored.
- Additionally, approximately 1.5 million Americans received funds in error.
When the U.S. bailout was enacted in the first quarter of 2021, the U.S. economy was in dire straits and many households needed help. This relief took the form not only of stimulus checks, but also of an enhanced child tax credit.
Prior to 2021, the maximum value of the Child Tax Credit was $2,000 per eligible child. Last year, that maximum increased to $3,600 for children under age 6 and $3,000 for those ages 6 to 17. until December.
Of course, getting that money to the masses in a timely fashion has been no small feat. And a recent report from the Treasury Inspector General for Tax Administration found that the IRS had actually done a pretty good job of sending child tax credit payments to those who were eligible.
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At the same time, the agency did not send these payments to several million beneficiaries who were entitled to this money. And he’s also sent a lot of payments to people who weren’t initially eligible.
Millions of people have been missed
First, the good news – the IRS accurately issued 98% of the help it was supposed to give under the enhanced child tax credit. Giving credit where it’s due is a big deal, because the IRS didn’t exactly have months and months notice to make those payments, and it was also responsible for pumping out stimulus checks to eligible Americans. .
Nonetheless, the IRS reportedly ignored about 4.1 million households eligible for the enhanced child tax credit. And that means many households may still be short of the money to which they are entitled. At a time when the cost of living is skyrocketing due to inflation, this is problematic.
What’s also troubling is that the IRS allegedly issued over $1.1 billion in erroneous payments. In total, a good 1.5 million taxpayers who weren’t actually entitled to installments under the enhanced child tax credit ended up receiving funds.
On a positive note, the IRS has already taken steps to correct its mistakes. Nevertheless, some households may still be sitting on funds they were never originally eligible for, while others lack income they could actually use.
If you received a payment in error
There are various reasons why some taxpayers have mistakenly received child tax credit installments. In some cases, the children for whom these payments were intended were too old to qualify in 2021. In other cases, multiple parents may have reported the same child on their respective tax returns (for example, a couple divorced who files separate returns) .
The IRS has sent letters to those who received child tax credit payments in error, and in most cases you will need to be prepared to repay that money. Now, you may be able to satisfy that balance with a reduction in your next tax refund. But if the amount you owe exceeds your refund, you’ll need to work with the IRS to repay that money. Just as the agency allows filers to set up installment plans for regular tax bills that they cannot pay in full, the agency will allow it in this situation as well.
Is the enhanced child tax credit gone for good?
The enhanced child tax credit seems to be off the table for 2022. It’s already October and lawmakers have yet to find a way to make an enhanced credit a reality. And no installment payments were made for the credit this year.
But lawmakers also haven’t given up on bringing an enhanced version of credit to life. And while they’ll have to agree on the specifics, it’s fair to say that at some point in the not-too-distant future, we may see a much more helpful and generous version of the child tax credit than which is currently in play.
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