Don't Throw Away That IRS Letter
If you are like me, your mailbox is flooded with junk mail, and it can be hard to know what to keep and what to toss. This is especially true at tax time. Generally, anything that says “Important Tax Information” needs to be kept. Forms like W2, 1099 and 1098 are all things that we are used to seeing.
However, new this year for parents with minor children is Letter 6419. Starting in July, the Biden administration issued advances on the Child Tax Credit. The amount was typically $300 per month per child for children 6 and under and $250 per month for kids between 7 and 17. The problem is that people don’t realize this was an advance on your 2021 tax refund. The amount you received needs to be reconciled and will be deducted from the 2021 tax returns that we will all start filing on Monday, January 24th.
The letter looks like this and if you see it, DON’T THROW IT AWAY. If you are married, you will receive TWO LETTERS. Both spouses will receive a separate letter showing their share of the credit.
If you don’t receive the letter, you can get a copy online by creating an account at www.irs.gov. In addition to Letter 6419 the account gets you access to a lot of cool features such as online payments and access to prior year transcripts. Not everyone is eligible however, so it’s still best to keep the paper copy.
Another new thing this year will be the reconciliation of the third stimulus. That was the $1,400 credit that came out in spring of 2021. Most people received it either through direct deposit, by check, or a prepaid debit card. If that is the case, then there is nothing you need to do. A separate notice will be mailed out to remind you how much you received called Letter 6475. If for some reason you didn’t receive your $1,400 payment, please tell your accountant so we can claim the $1,400 as a credit on your 2021 tax return.
There is also an opportunity to “double dip”. If you got the $1,400 for an older child, it is possible to emancipate that child for 2021 and (legally) receive a SECOND payment. Of course, giving up the dependency exemption means the loss of the $500 dependent credit and possibly some education credits as well so it’s best to talk to an expert to go over all your options. (Pro tip: Turbo Tax doesn’t do that for you.)
If you start your own taxes and get stuck, please call one of our tax professionals and let us show you why it pays to have your own personal tax advisor. Most of our clients don’t pay a thing for our services because we strive to save you way more than we charge.