Sunday Read: Did you get advance child tax credits in 2021? What to know before filing taxes

IRS tax deadline is April 18

Year-end money: Warning for anyone who took advance child tax credit

If you accepted advance child tax credits in 2021, you’ll want to know this information before you file taxes in 2022.

Sunday Read is ClickOnDetroit’s Sunday news review to help readers catch up on some of the most important topics of the week.

Many families received expanded child tax credits last year amid the pandemic.

The advance child tax credit gave families $300 per child each month from June through December 2021, with a cap of $3,000 for children ages 6-17. The payments were essentially an advance on money you would have received in your 2021 refund.

The money you received in 2021, ahead of time, will count against your normal tax refund. In some cases, you may actually owe money -- especially if you’re experienced a substantial change in your income over the last year.

“When those benefits discontinue, there’s going to be a rude awakening, if you relied on those benefits to pay your daily and monthly bills,” said Nathan Mersereau, certified financial planner and president of Planning Alternatives.

The average American’s tax refund was $2,827 in 2020. For those who received the $3,000 cap in advance child tax credits in 2021, you will not see that tax refund.

Families who received the advance credits but added children in 2021 should receive additional credit on their refund.

“Look at 2022 as a fresh year, a fresh start and find ways that you can make your money work for you,” Mersereau said. “Don’t get caught into the trap of relying on a government benefit that was really only temporary benefit, although it was helpful at the moment.”

Experts recommend getting your taxes done as early as possible this tax season, to find out how much you owe right away, even if you don’t pay right away. If you do owe money, that should hopefully give you some time to pull that money together before the April 18 deadline.

Make sure you do your taxes early and find out how much you owe, if you do owe, so you can pull that money together before the April 18 deadline.

Watch Rod Meloni’s full report in the video player above.

The expansion of the Child Tax Credit program was approved in early 2021 as part of the national government’s pandemic relief legislation. The legislation not only expanded the program, but also the scope of who is eligible to participate.

The program expired in December, as scheduled, despite Democratic lawmakers’ attempt to extend the expanded benefits into 2022. So far, the program has not been extended.

COVID-expanded child tax credit benefit nears lapse

AP reports (Dec. 15, 2021): It’s one of the most far-reaching of all the federal aid programs launched during the COVID-19 pandemic — up to $300 per child going directly into the bank accounts of families on the 15th of every month.

But the last checks will go out Wednesday, the expanded child tax credit program expiring unless Congress revives it for 2022. That appears highly uncertain as lawmakers try to push President Joe Biden’s roughly $2 trillion social and environmental bill into law.

The swift launch, and potentially quick end, to the bolstered child tax credit highlights the risks of enacting sweeping social policy changes in a politically divisive environment, without consensus to make the changes stick. Biden and Democrats on Capitol Hill might not have been praised by voters for adding the new benefit, but they almost surely will be blamed if the money abruptly stops flowing next month.

“We need to keep them going,” said Rep. Suzan DelBene, D-Wash., and chair of the House’s New Democrat Coalition. “Families deserve that predictability and certainty.”

The child tax credit wasn’t new when Democrats, over the objections of Republicans in Congress, altered the program as part of Biden’s $1.9 trillion coronavirus relief bill shortly after he took office in January.

But rarely has it provided the boost to families seen with this year’s changes.

For more than 20 years, American taxpayers have been afforded a tax break for their children. Started as a $500 per child write-off under Bill Clinton in 1997, it changed over time and was beefed up under Donald Trump’s GOP tax cuts in 2017. Biden’s American Rescue Plan increased the credit to $3,000 a year, added 17-year-olds and boosted the amount to $3,600 for children under six years old. Most dramatically, it gave the credit to millions of families with low or no income, even if they didn’t earn enough money to pay income taxes or pay enough tax to qualify for the refund.

Studies suggest the child tax credit expansions are expected to cut child poverty by 40% — with 9 of 10 American children benefiting. All told, some 4.1 million children are on track to be lifted above the poverty line, according to analysis from the Center for Budget and Policy Priorities.

After the first checks started arriving in July, about one-third of recipient families used the money during the first few months to pay down outstanding debt, along with paying for school supplies and child care, according to preliminary reports from the U.S. Census Bureau.

Families in New Mexico, which has one of the country’s highest child poverty rates, spent nearly 46% of their child tax credit money on food, a study by Washington University in St. Louis’ Social Policy Institute found.

“It says a lot about what families are worried about,” said Sharon Kaye, communications director for New Mexico Voices for Children. “This is hugely important to a lot of families.”

Read more here.

Related: 2022 Social Security payment schedule: When to expect checks

About the Authors:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.