The IRS is forwarding letters to millions of parents who received advanced Child Tax Credit payments last year, pushing them to use Form 6419 to complete their tax returns. However, the agency issued a warning on Monday, stating that some of the letters may contain inaccurate information.
Given that the IRS is recommending individuals take additional care this year to ensure their tax forms are accurate, the erroneous information might severely impact some families’ finances.
The IRS is presently working through a backlog of 6 million individual tax returns filed in 2021, many of which were marked for inspection due to errors made by individuals in declaring how much money they got in government stimulus funds or other tax credits.
Tax refunds are frequently the most extensive check a family receives each year, with payments averaging over $2,800 in 2021. That means there’s a lot on the line if a family underreports the amount of advanced CTC payments they got. If the IRS encounters a processing bottleneck, refunds might be delayed for weeks or even months.
How Did This Happen?
The IRS said it’s unclear how many people got the wrong letters, but it could be a small number of people who moved or changed bank accounts in December.
The CTC checks may have been undeliverable in some situations, or the check bounced from the bank where the account was closed., according to Ken Corbin, the IRS’s top taxpayer experience officer, who talked to reporters on Monday.
“Then the letters might not reflect what the taxpayer got,” Corbin added.
If a taxpayer is concerned that the letter they got is incorrect, he recommends going to IRS.gov and logging into their account there. According to him, the IRS.gov website will include the correct information to use on their tax return.
“We want people to have all of the information they need to file a proper return,” Corbin said.
What Does That Mean for Taxpayers?
The potentially incorrect letters might exacerbate what IRS Commissioner Chuck Rettig has predicted will be a “very difficult filing season” for households and tax preparers. He also advises taxpayers to follow these guidelines to guarantee that their returns are processed quickly:
- Make a digital file.
- File as soon as possible when the IRS opens for business on January 24.
- Make a direct deposit request.
“We strongly advise taxpayers not to file on paper if they need a refund immediately,” Rettig added.
He went on to say that filing an incorrect return — such as guessing how much you got from the advanced CTC payments — might “cause an expensive delay.”
According to the IRS, people who follow that instruction and have no red flags on their tax returns should receive their refund within 21 days. “Right now, we aren’t sure,” Corbin said when asked how long it might take to get a refund if someone files on paper or makes a mistake on their returns.
The Importance of Accurate Data
Reporting correct data regarding the advanced CTC payments is critical because the enhanced tax credit was paid 50% in advance, and the other half will be given through taxpayer refunds when they complete their 2021 tax return.
Families with children below six, for example, are eligible for $3,600 in tax credits, with $1,800 paid in monthly installments from July to December 2021. They’ll claim the remaining $1,800 on their 2021 tax return.
However, if a family erroneously claims $1,500 in CTC payments last year and then claims $2,100 on their tax return — more than they are entitled to — the IRS will flag the file for investigation, causing the refund to be delayed.
Corbin believes the incorrect letters were delivered to a limited number of taxpayers rather than millions of children. He stated, “The online portal is correct, and we recommend them to check IRS.gov.”