![]() In 2020, the federal government waived federal taxes on all unemployment income. She urges consumers to refer to their Child Tax Credit Letter 6419 to verify how much they actually received in 2021 so they'll know exactly how much to claim. ![]() TurboTax CPA and tax expert Lisa Greene-Lewis tells Select that if tax filers don't report this information correctly, they could "see an adjustment in their return" from the IRS. It's also likely many Americans have been reporting incorrect numbers because of the advance. Only being able to write off this smaller amount leads to having a smaller refund. "Other people may have received too much of an advance credit but not qualifying at all when filing their tax return, which resulted in a significant decrease in their refund."Ĭonsider the following example: if you had a $3,600 child tax credit write-off but received $1,800 as an advance last year, you're only allowed to write off $1,800. "The advance of child tax credits during the year may end up reducing an individual's refund when they file," Bronnenkant tells Select. ![]() Eric Bronnenkant, Head of Tax at Betterment, discusses the different scenarios many people are now finding themselves in. When the American Rescue Plan went into effect in March 2021, it provided financial relief to millions of families, increasing the 2021 child tax credit from $2,000 to $3,000 per child age 17 and under and adding an extra $600 for children under six years old.Īnecdotally, this has been a major reason why many Americans are disappointed by their tax refunds this year. That said, if you've been paying private student loans through services like SoFi or Laurel Road, your payments and interest haven't actually stopped, so if you fall into this category, be sure to utilize this deduction on your tax return. As a result, consumers have had more taxable income remain in their pockets, which, in turn, has led to them receiving a smaller tax refund. While this has been a great benefit to those who were struggling to pay them, it also means the $2,500 above-the-line deduction has been rendered worthless during the freeze. Department of Education froze all public student loan payments and stopped interest from accruing on student loan accounts. When the pandemic shutdowns went into effect, the U.S. If you're unsure as to why your tax refund may be smaller than usual, it may have been because you encountered or received one or more of the following during last year: Frozen student loan debt While government initiatives put more money in Americans' pockets during the pandemic, they also paved the way for fewer tax write offs, making things difficult for the many working Americans who rely on their tax refund to provide a boost to their finances.Ī recent H&R Block survey suggests that while 73% of people who struggle financially intend to save some or all of their tax refund each year, only 44% of them end up putting that money away because of unexpected expenses. The 2021 tax year presented many challenges for taxpayers. Investing +More All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs Bonds Help for Low Credit Scores +More All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score Taxes +More All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds Small Business +More All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business ![]() Personal Finance +More All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief
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