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Child Tax Credit: Nearly Half Beneficiaries Expect to Receive a Smaller Tax Refund


A  recent GOBankingRates poll of 1,000 Americans says that 38% of child tax credit recipients believe they will owe money or receive a smaller refund. According to GOBankingRates chief content data researcher Andrew Murray, this mentality stems from the belief that the extra money is too good to be true.

How benefits affect CTC recipient’s taxes

Advance payments of the Child Tax Credit (CTC) were distributed to 61 million eligible recipients in 2021 as part of the American Rescue Plan. Even though it was a pleasant surprise for many families, taxpayers are concerned about the impact of these payments on their tax refund.

GOBankingRates tax study shared that  34% of child tax credit recipients are unsure how the benefit would affect their taxes. GOBankingRates consulted with tax experts to learn what to expect when filing this year to assist both groups. 

Simply because you obtained the Child Tax Credit does not mean it would lower your tax refund. Wendy Barlin, a CPA, recommended that you consider the Child Tax Credit as if you had received a portion of your return early. There is no “loss of a taxpayer’s refund.” It’s only a matter of timing; refunds were essentially prepaid, she added. 

However, if you’re attempting to determine if your refund will be the same as last year, there are a few more elements to consider, MSN reported. Because the amount you received is based on last year’s tax returns, some parts of your life in 2021 may have changed, affecting your tax refund, such as if your dependents have changed.

For example, if you received an advance payment for a child who is no longer your dependent, your refund may be decreased, according to Lavina. It’s also possible that you owe money because you were given a tax credit for a child that you no longer claim.

If your income has changed, this could also affect your refund. For instance, if you received advanced tax payments in 2021 and your modified adjusted gross income is higher in 2021 than in 2020, you may be required to repay some of that money, according to Mark Puzdrak, CPA.

In other words, the money you received last year is technically part of your rtax refund. Even if the amount you receive this year is less than the previous year’s, if all of your circumstances are the same as in 2020, you received the same refund, just at different times.

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