New information your tax preparer will need to prepare your taxes.
Many taxpayers have enjoyed the payments they have received from the federal government as the government tries to negate the financial damage that COVID has inflicted in its citizens. Specifically, two of those payments were the third stimulus payment, officially named Economic Impact Payment -3 (EIP3), and Advance Child Tax Credit, ACTC. The EIP3 payment was $1400 for taxpayer, spouse, and each dependent under the age of 19, eligibility of EIP3 was, restricted by the household income and other items. You can see the eligibility requirements on the IRS website irs.gov. The ACTC payments were an advance of half of the CTC whic
h was raised to $3600 for children under 6 years and 3000 for dependents 6 to 17. You can also see the eligibility requirements at irs.gov.
If you were one of the many households that received one of these payments, there is something you need to know about as you gather your documents for your tax preparer. Your tax preparer must reconcile the payments sent to you with the amounts you were eligible for. When there are differences between the amounts paid and the amounts you are eligible for the difference must be rectified, so you may receive additional payments or you may have to return some of what you have received, this will be done as part of the return not in separate transaction. The kicker is that if you report an amount different than what the IRS has on record your return will have to be reviewed, which in the past has caused major delays in getting a return processed which equates to your refund being slow in getting to you, like maybe by Thanksgiving.
So how do you ensure that you have the correct amount on your return? You can review your account on IRS.gov or you can be sure to save 2 documents you should be receiving in January. If you are a tax preparer it would be advisable to get authorization to review the taxpayer’s tax record at the IRS to ensure an accurate return if the taxpayer does not provide these documents. It would be wise for the taxpayer to check the accuracy of these documents when you receive them to see that you received the amounts they are reporting. You should receive a letter 6419 that will report the amount of Advance Child Tax Credit that was sent to you. The other document to be watching for is IRS Letter 6475 which will contain the amount of your 3rd stimulus payment. These are important parts of an accurate tax return and as stated earlier returns deemed inaccurate fall into having to be look at by a human at the IRS and I have clients that are still waiting for their return to surface out of the special processing pile. One last thing to consider is that if your tax preparer has to go the IRS to find the amount of these payments your cost to do the return will increase considerably.