IRS sending important letters to stimulus check, child tax credit recipients

Americans who received the third round of stimulus checks or an advanced child tax credit payment should be on the lookout for two important letters from the Internal Revenue Service.

The IRS said that it began issuing the letters on child tax payments in December and will continue through the first part of the new year, while the letters on stimulus payments will be delivered by the end of January. 

The agency urged anyone who receives the letters to hold onto them ahead of the 2021 tax filing season, which will likely begin later this month. The information in the letters is intended to help individuals avoid errors and delays in processing their returns this year. 

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Families that received monthly installments of the boosted child tax credit last year will receive a letter – called Letter 6419 – from the IRS informing them of the total amount of the advanced payment they received and the number of qualifying children used to calculate the payments.

Because at least half of the enhanced credit will be paid out as a lump sum when parents receive their 2021 tax return, recipients should keep the letter and use it to accurately reconcile the credit they already received when filing their taxes this year. The information is pertinent to determining how much more money families receive from the credit when they fill out Schedule 8812 and Form 1040.

People who received the monthly payments can also check the amount of their payments by using the CTC Update Portal.

If families opted out of the monthly payments, they can claim the full amount of the child tax credit on their 2021 federal tax return. This also applies to families who don't normally need to file a tax return.

Low- and middle-income parents are eligible to receive $3,000 for every child ages 6 to 17 and $3,600 for every child under age 6 under the expanded child tax credit. The payments are income-based and begin to phase out for individuals earning more than $75,000 and married couples earning more than $150,000. The tax credit is tapered by $50 for every $1,000 a family makes over the income thresholds.

If families earn too much to qualify for the sweetened tax credits, they can still receive the $2,000 credit for their children if their income level is below $200,000 for individuals and $400,000 for married couples. 

There’s no limit on the number of children who can receive the credit per family.

The second letter – Letter 6475 – that the IRS is sending involves the third stimulus check worth $1,400 that the government delivered in March 2021. The check included a "plus-up" payment to people who were eligible for extra money based on changes in income or employment status from 2019 to 2020.

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The latest letter will reflect how much that individual was paid and can help people determine whether they are entitled to, and should claim, the Recovery Rebate Credit on their tax returns when they file in 2022. It only applies to the third stimulus payment issued in March 2021, which were essentially advance payments on a credit that would be claimed on a 2021 tax return.  

"Most eligible people already received the payments," the IRS said. "However, people who are missing stimulus payments should review the information to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2020 or 2021."