Expanded Child Tax Credit Adds More Confusion to Tax Season

Expanded Child Tax Credit Adds More Confusion to Tax Season

Some taxpayers will have larger refunds, especially those who did not accept the child tax credit payments.

When the calendar flipped to 2022, millions of American families were suddenly cut off from their monthly enhanced child tax credit payments.

Between July and December, these enhanced credits provided eligible families as much as $3,600 for children under the age of six and up to $3,000 for children between ages six and seventeen. This amounted to a $250 or $300 payment for each child every month. Now, these same families can claim the second half of the credits by filing their 2021 tax return.

Refund Disappointment

This may sound great on paper, but for many of those who already have received their tax refunds, it indeed has been a big letdown. “Democrats’ expansion of the child tax credit may have expired but it’s not gone completely. More than forty million Americans now must contend with it on their annual tax returns. And it’s proving a curveball for many,” Politico writes.

“People who received the monthly child tax credit checks lawmakers created last year may be surprised to see those payments are now reducing or even eliminating their tax refunds. Some divorced people could be upset to learn they weren’t actually eligible for checks they received and now have to pay the money back,” Politico adds.

Average Refund Goes Up

On the flip side, some taxpayers will have larger refunds, especially those who did not accept the monthly payments or who had children last year. Moreover, a “loophole” in the law has allowed some taxpayers to claim more money than the law intended.

It certainly appears that many have already landed those bigger refunds. The latest data out of the Internal Revenue Service shows that the agency has already issued nearly thirty-eight million tax refunds that amount to a total of nearly $130 billion. Broken down, that comes out to an average refund of $3,401 per individual. Notably, that comes in at $411, or about 14 percent, higher than last tax season.

Citing Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center in Washington, D.C., MarketWatch pointed to the more generous child and dependent care credit, the enhanced child tax credit, and the earned income tax credit to explain the larger refunds currently being seen this year.

“The question is whether this trend can hold for the next two-thirds of the returns—the families still to file sure hope so,” the financial news site writes.

Regardless of the varying tax refund amounts, the ending of the enhanced credit program has already had devastating consequences. In a recent op-ed for CNN Business, Maag claimed that child poverty has surged by more than 40 percent.

“This effect is being exacerbated by the highest rate of inflation since the early 1980s, putting extra pressure on low-income households who just lost a key source of financial support,” she wrote.

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.