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IRS Mistakenly Sends Over $1 Billion in Child Tax Credit

An audit this past Tuesday found that the IRS sent over $1 billion to ineligible taxpayers in child tax credit payments last year. 3.3 million incorrectly sent payments were found between July and November of last year, as well as $3.7 billion worth of payments that should have been sent, but never were to over 4 million eligible taxpayers!

What Happens Now?

These wrongly delivered payments were sent to roughly 1.5 million ineligible taxpayers in instances where “a dependent did not meet age requirements, was deceased, or was claimed on another tax return” the Treasury Inspector for Tax Administration report said. It is likely, however, that the people who did receive ineligible payments, will see that reflected on their 2021 tax return, and will have to pay the money back. Those who are qualified for the credit and did not receive it can claim the full amount on their return. The agency sent letters to assist with the reconciliation and covered how to handle excess payments when filing their 2021 returns on the IRS FAQ page.

Silver Lining

However, despite the extravagant numbers, the IRS says that the majority of their payments made were made correctly. Out of the 178.9 million total payments made, only 3.3 million were wrongly sent and 4 million eligible taxpayers missed payments.

Monthly payments began In July of 2021 after being enacted in March through the American Rescue Act when the credit was expanded temporarily from $2,000 to $3,000 for a child under 18 years old, and up to $3,600 for children under 6 years old.

Wrap Up

Hopefully, the IRS can mitigate these mistakes in the future, as there were millions of Americans relying on those payments from the agency that never came. However, the agency did just receive a massive funding boost due to the recently passed Inflation Reduction Act this summer and made it a point to upgrade its systems. If you have any questions or concerns about the child tax care credit, contact a trusted financial advisor for assistance.

 
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