With all of the COVID relief legislation, tax season this year could get messy.
Don’t be surprised if the IRS corrects your tax return and sends you a bill after you file because their calculation doesn’t match yours.
To reduce that possibility, look out for two potential “gotcha’s” this year.
Advanced Child Tax Credit
The first is a “gotcha” that applies to anyone with kids. It’s the advanced child tax credit.
If you’ve got kids, then you likely were getting monthly checks from Uncle Sam which was an advance on your $2,000 annual child tax credit.
However, if you end up making over $400k in household income this year (as a couple), then your child tax credit is phased out and you might have to pay some of that money back.
It should all wash out in your tax return, but only if your tax preparer has all the info she/he needs.
Part of that info is IRS Letter 6419 which is currently being sent out. It details how much child tax credit you received.
So keep a lookout for that. (If you haven’t gotten it already, you should within the next two weeks).
3rd Stimulus Check
The second “gotcha” works the same. You might have gotten a third stimulus check last year for $1400 per household member.
This went out to singles making <$80k or couples making <$160k.
If you got the check, but end up making income over those limits, then you’ll have to pay it back.
IRS Letter 6475 will detail any stimulus payments you may have received.
Getting a letter from Uncle Sam telling you to send more money is no fun (speaking from experience).
So make sure to keep a look out for these letters!
