However, several million U.S. residents will be getting some stimulus money as tax credits or or even refunds on their 2021 federal income-tax filings. These include people who were underpaid by the second or third round of stimulus checks, and people who gained a new dependent in 2021, such as a baby or an elderly or disabled relative. Many more people are eligible for expanded child tax credits, half of which were already paid out in advance to millions of parents. Those expanded credits technically aren’t stimulus money, but they were nevertheless rolled into the American Rescue Plan Act of March 2021, aka the Biden stimulus bill. Here’s what you need to do in each of these three scenarios.
Underpaid stimulus checks
Because all three rounds of stimulus checks were rushed out, mistakes may have been made in calculating how much you were eligible for. If you made a lot less in 2021 than you did in 2020, it’s possible that you’re entitled to more money because the amount of your check would have been based on your 2020 (or even 2019) income. You need to watch for a letter coming from the IRS called Letter 6475 that will detail how much stimulus money you received from the third stimulus bill in 2021. That letter is very important — don’t throw it out, and instead keep it with your tax paperwork. Then you need to use the amount paid out according to Letter 6475 to see if you qualify for a Recovery Rebate Credit (opens in new tab) on your 2021 federal income-tax return. If you feel that you should have gotten more from the first and second stimulus bills passed under President Trump in April and December 2020, then the procedure is slightly different. Here’s information on how to do that (opens in new tab) — click “How to Claim the 2020 Recovery Rebate Credit.” However, if you ended up making a lot more in 2021 than you did in 2020, you may have to pay some of your stimulus-check money back. That could happen if your 2021 income crossed above one of the income thresholds, which were $75,000 for an individual tax filer, $150,000 for couples filing jointly and $112,500 for heads of households.
New dependents
The Biden stimulus bill paid out $1,400 for each U.S. resident, young or old. If you welcomed a new baby in 2021, whether through birth or adoption, then you can claim that $1,400 as a credit on your 2021 federal taxes. (This is not the same as the child tax credit; see below.) The same goes if you took in a child or dependent adult in 2021, such as a grandchild, elderly parent or grandparent, niece or nephew or indeed anyone who doesn’t work and doesn’t have anyone else to provide for them. Just make sure that that person isn’t claimed as a dependent on anyone else’s tax returns. Here’s an online tool to figure out who qualifies as a dependent (opens in new tab). As with the above scenario, you’ll need to watch for Letter 6475 and then claim the Recovery Rebate Credit on your 2021 income-tax return. But instead of claiming less income as the reason you should get more money, you’ll need to simply claim a new dependent.
Expanded child tax credits
This one is less complicated. All U.S. residents with dependent children who were under the age of 18 in 2021 get $3,000 in tax credits for each child under age 6 and $3,600 for each child between their 6th and 18th birthdays. If the child turned 6 or turned 18 in 2021, the earlier rate applies. You’ll also get to claim the credit if you had or adopted a new child in 2021. Income limits apply; those who make more than the 2021 stimulus-check thresholds get the credits phased down (opens in new tab) to the old child tax credit rate, which is $2,000 per child. Those who make above $200,000 as individuals or $400,000 as couples have child tax credits phased out altogether. Those old rates revert to everyone in 2022, unless the Democrats in Congress somehow manage to extend the expanded child-tax credits for several more years. Six monthly advance payments from July through December 2021 gave parents half of the expected child tax credit up front. The other half comes as a tax credit on the 2021 federal income tax return. That amount was calculated on the number of children you had in 2020, so if you have more kids now, you’ll get to claim the full amount, not half, of the credit for them on your 2021 income-tax return. Because the expanded child tax credit is not a stimulus payment, the paperwork is different. Parents of dependent children need to watch for the arrival of a second official letter from the IRS, Letter 6419. Many people likely have already received this letter. Again, that letter is very important, because it will detail how much of the expanded child tax credit you have already received. Use the amount specified in that letter to calculate how much of the expanded child credit you can claim on your 2021 federal income-tax return.
How quickly will I get my tax refund?
If you have all the paperwork (including the two IRS letters mentioned above), then you can file your 2021 federal income-tax return now. The deadline for filing is April 18, except in Maine and Massachusetts where it’s April 19. Filing electronically will get you your refund faster, perhaps in as little as three weeks after you file. That’s in the best-case scenario in which there are no errors on your tax forms and nothing that would flag your return for fraud. Speaking of tax refunds, be on the lookout for a TurboTax phishing scam that aims to steal your personal information.
