The IRS is issuing information letters to recipients of the Advance Child Tax Credit (CTC) and the third round of the Economic Impact Payments (EIP). Our accountants are encouraging recipients of both letters to retain them for their tax records, as they should be used when preparing 2021 tax returns to reduce errors and delays.
Letter 6419 – 2021 Advance CTC
In December, the IRS started sending out Letter 6419, 2021 advance CTC. It contains information that allows taxpayers to review and confirm any advance CTC payments they received in 2021. Because the IRS recently announced that Letter 6419 may contain incorrect payment information, taxpayers should verify their payments using the CTC Update Portal, which contains the most up-to-date information.
Taxpayers who received the advance CTC payments will need to reconcile them when processing their 2021 federal tax returns, currently expected to be due April 18, 2022. Because the advance CTC payments were calculated using 2019 and 2020 tax returns, taxpayer status changes, such as income level or number of dependents, could affect eligibility.
Importantly, eligible families—including those who aren’t usually required to file a tax return—who did not receive any advance CTC payments can still claim the full credit on their tax return.
Letter 6475 – Third EIC
IRS Letter 6475, Your Third Economic Impact Payment, will be mailed in late January and provides recipients with information regarding whether they received the EIP or if they should claim the recovery rebate credit on their 2021 federal tax returns. The letter only applies to the third round of EIPs (distributed March through December of 2021), and includes “plus-up” payments, which were issued to taxpayers who received a third EIP after the IRS received their updated eligibility information.
See the IRS’s COVID Tax Tip 2022-03, released Jan. 5, 2022, for additional information about both letters.
If you received either information letter, please save it and share it with your tax preparer.