Watch for letters IRS is mailing in January regarding any Recovery Rebate Payment or Advance Child Tax Credit Payments you received. Send us copies along with your other tax information to guard against reporting errors and unnecessary delays with your 2021 return.

The general consensus among tax professionals is that these payments are going to cause a lot of reporting problems this year. There could be confusion with both of them since the advance child credit payments may have changed from one month to the next, and the stimulus check may have come in two installments for some taxpayers. Any discrepancy between what you report in your return vs. IRS’s records could mean a 6-10 month or longer delay in IRS processing your tax return and any refund you may be due, or an additional tax assessment later. Some folks who filed last spring are just now getting their 2020 refunds, and millions of returns remain unprocessed, many we suspect due to issues with last year’s Recovery Rebate.

Recovery Rebate Checks

This month, IRS is mailing Letter 6475 to everyone who received a third-round Recovery Rebate in 2021. Not to be confused with the second round payments which generally came in February, third round payments began in March and ran into late fall, and sometimes came in more than one installment. Based on our experience with last year’s returns, reporting errors may occur if you rely solely on your memory, so please be sure to include Letter 6475 with this year’s tax materials.

Advance Child Tax Credit (ACTC)

IRS is also mailing Letter 6419 to everyone who received any amount of ACTC payments. These were made on the 15th day of every month from July through December. You may not have received one every month if you filed your 2020 return after May, or you opted out of the payments part way through. Payment amounts may also have changed from one month to another for a variety of reasons.

IRS made these payments via direct deposit, paper checks, and prepaid debit cards. Sometimes the payment method even changed mid-stream. Many who received the debit cards thought they were some sort of scam or junk mail and threw them away. And having been mailed, there’s no guarantee you even received every payment if it came via check or debit card, yet IRS records will show that you did.

There are so many ways this could go wrong, so if you received any ACTC payments, please be sure to include Letter 6419 with this year’s tax materials, along with Letter 6475 for your stimulus payment.