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Tax Season 2022 Guide: 4 refund-boosting credits for you to know

Ashley Altus, CFC
Ashley Altus is a personal finance writer who covered financial planning with a focus on money management and household finance for OppU. She is a Certified Financial Counselor through the National Association of Credit Counselors. Her work has appeared with O, the Oprah Magazine; Cosmopolitan Magazine; The Smart Wallet; and Float.Today.
Read time: 7 min
Updated on November 4, 2022
Qualifying taxpayers can cash in big this year. Here’s how.

For the majority of taxpayers, Tax Day is April 18, 2022. Because of President Biden’s American Rescue Plan, this tax season comes with a couple of notable changes.

Tax credits for tax year 2021

Tax credits can directly decrease the amount you owe in taxes. Taking advantage of tax credits you and your family may qualify for can dramatically cut your tax bill. After the credit is used to pay for any taxes you may owe, you’ll potentially receive the remainder as a refund.

Eligible individuals and households can claim the Child Tax Credit, Child and Dependent Care Credit, Earned Income Tax Credit, and Recovery Rebate Tax Credit by filing their 2021 tax returns. Here’s a breakdown of each one.

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  • Child Tax Credit
  • Child and Dependent Care Credit
  • Earned Income Tax Credit
  • Recovery Rebate Tax Credit

Child Tax Credit (CTC)

What’s new

  • Qualifying taxpayers can request the second half of the expanded child tax credit.

The backstory

The American Rescue Plan passed temporary changes to the Child Tax Credit for lower-income households. The credit increased to $3,600 for children under the age of 6 and $3,000 for children between the ages of 6 and 17.

Eligible households received a portion of the Child Tax Credit in July 2021 via monthly payments of $300 per child under the age of 6, and $250 per child between the ages of 6 and 17. The Advance Child Tax Credit payments obtained throughout 2021 are not considered income.

The Internal Revenue Service (IRS) used your 2020 tax return to determine eligibility for the payments.

“The advanced payments were set at half of the amount of your estimated credit,” says Geoff Harlow, CPA, a tax partner at Wipfli LLP. “Unless your income has gone up significantly compared to the previous year, you’re going to be entitled to receive the other half that wasn’t paid out.”

If you’re eligible, claim the child tax credit by following the instructions from the IRS. Begin by locating Letter 6419, which the IRS started sending out in December 2021. It details the amount of advanced payments you received in 2021. You’ll need to reference this information to determine the amount you can claim when you file your 2021 tax return to receive the rest of the credit.

If you tossed the letter or misplaced it, you can access this information online too through the Online Account. You can view any other economic impact payments you’ve received here as well.

Taxpayers will use Schedule 8812 (Form 1040) to report advanced child tax credits. It’s important to note that even if you didn’t receive monthly advanced payments, you may still qualify for the credit. When you fill out your tax return, you’ll verify if you’re eligible for the credit and claim the full amount. You can check your eligibility for the credit with this IRS tool.  The IRS will then issue you a lump-sum payment.

The IRS provides answers to common questions about the Child Tax Credit on its website.

Child and Dependent Care Credit

What’s new

  • Qualifying parents and caregivers can claim a credit of up to $8,000 (compared to $1,200 last year) for work-related care expenses.

The backstory

The Child and Dependent Care Tax Credit offers tax credits to help parents and caregivers offset the cost of care. It is limited to care that allows the parent or caregiver to work, look for work, or go to school. Last year, it offered up to $1,200 for such care. The American Rescue Plan expanded it so filers can claim up to $8,000.

To claim the Child and Dependent Care Credit, follow the instructions offered by the IRS. You will need to complete Form 2441 and include it when you file your federal income tax return.

Earned Income Tax Credit (EITC)

What’s new

  • The maximum credit increased from $538 to $1,502 for eligible taxpayers with no children.
  • Income eligibility increased — single filers can make up to $21,430, and joint filers can make up to $27,380.

The backstory

Under the American Rescue Plan, the federal earned-income tax credit has been temporarily expanded for the 2022 tax season. The expansion is offered specifically to workers without qualifying children. Workers who claim dependents won’t see much of a change this year.

For qualifying taxpayers, this year’s maximum credit was raised to nearly three times the amount offered in the previous year.  Income limits were also expanded, allowing some workers who were excluded in the past to claim the credit.

To claim the earned income tax credit, follow the instructions from the IRS.

Recovery Rebate Tax Credit

What’s new

  • Taxpayers who were eligible for the third stimulus payment but never got it might be able to claim it for a tax credit.

The Backstory

The third economic impact payments (EIP) went out beginning in March 2021. Most eligible people received their checks, but some didn’t. If you were eligible and never received yours, you may be able to claim the $1,400 as a “recovery rebate credit” on your tax return.

“As with prior stimulus payments, the EIPs were set up as advance payments of a recovery rebate tax credit. If you qualified for EIPs, you should have received those payments already,” says Susan Allen, CPA, senior manager for Tax Practice & Ethics with the American Institute of CPAs. “However, if the IRS owes you more, this additional amount will be captured and claimed on your 2021 income tax return.”

To claim the recovery rebate tax credit , follow the instructions from the IRS. The credit can reduce the amount you owe in taxes and potentially contribute to your tax refund. For those who did receive the stimulus payment, please remember that you don’t need to include it on your tax filing. Stimulus checks are not considered taxable income.

Unemployment Benefits

What’s new

  • Unemployment benefits will be taxed.

The backstory

Typically, unemployment benefits are taxed like other forms of income. The American Rescue Plan waived federal taxes last year for up to $10,200 in benefits. Many states offered relief too, giving jobless workers a tax break.

This year is shaping up to be different.

“Another thing to note that's different in 2021 is the treatment of unemployment compensation,” says Allen. “There is no exclusion from income. The $10,200 income tax exclusion that a taxpayer may have received in 2020 is no longer available in 2021.”

Unless Congress acts to carry over the benefit from the prior year, which looks unlikely, all unemployment benefits received in 2021 will be taxable income. This means that jobless workers who collected unemployment will need to pay taxes on the income. If not enough money was withheld for the taxes when the benefits were paid, filers may owe money on tax day. Form 1099-G details the amount of unemployment benefits you received, as well as state and federal taxes that were withheld.

How to get your tax refund ASAP

Similar to last year, the IRS has warned its resources have been strained because of COVID-19-related issues. Despite the warning, most Americans should receive their tax refund within 21 days after filing their return.

Filing your taxes early is the first step to receiving your refund, but there are other best practices you can follow to receive the swiftest refund possible. You can track the status of your refund using the IRS 'Where’s My Refund?' tool.

1. Set up direct deposit

The quickest way to receive your tax refund comes when the IRS can directly deposit it in your account. Without your bank information, the IRS will mail you a check, which can add time to processing your return.

2. File online

Receive your tax refund the fastest by e-filing.

“Paper returns need more processing and additional review to make sure information has been inputted correctly into the IRS system.” Harlow says.

Individuals and families with an adjusted gross income of $73,000 or less in 2021 can avoid paying tax preparation software fees by using  IRS Free File.

3. Check for accuracy before you file

Even if you’ve elected to file your tax return online and selected direct deposit, a discrepancy in reporting can cause a hiccup. An inaccurate return is flagged and requires manual review. The IRS specifically cautions taxpayers who received the advance Child Tax Credit or a third stimulus check to report these amounts accurately to prevent processing delays. Double-check every amount you’ve reported on your tax return.

Article contributors
Contributor photo
Susan Allen serves the accounting and tax profession, working to ensure CPAs have the support, tools and guidance they need to remain the premier providers of tax services. Embracing technology and the progression of the profession, she frequently writes and speaks on emerging tax topics and is regularly quoted in news sources, such as The New York Times, CNN, Forbes and CNBC. She was recognized by CPA Practice Advisor as a 2021 40 Under 40 Honoree –– an award that recognizes emerging leaders in the accounting profession.
Contributor photo
Geoff Harlow is a tax partner at Wipfli LLP, a national accounting and consulting firm. Geoff is also a past Chairperson of the Illinois CPA Society. He serves a variety of clients, including public companies, closely-held companies, and high-income individuals. He is a frequent guest on TV and radio programs to discuss tax matters, and has been quoted in many national and local publications.

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