The IRS announced it will be sending out a recap of payments sent to taxpayers for the multple rounds of Economic Impact Payments and Advanced Child Tax Payments. Here is what you need to know.
Economic Impact Payments
During 2021, the IRS issued millions of economic impact payments. In a recent announcement the IRS claims they will send Letter 6475 to all recipients of the money sent under these programs. Use this letter as a guideline to file your tax return. Letters are being sent out in late December and early January, so if you have not received yours, it should be coming shortly.
Advance Child Tax Payments
For the second half of 2021, the IRS paid out 50% of projected child tax credit payments to qualified households using their own formulations. Now the IRS is claiming they will be sending out a recap of those advance payments in Letter 6419 to account for them correctly on your tax return. As with the economic impact letters, you should receive yours in January.
Wait for the letter. If at all possible, do not file your tax return until you receive the appropriate letter(s). Then provide them with other documentation to prepare your tax return.
Trust but verify. Do not assume the IRS letter is correct. Review your own records, ideally, prior to receiving the IRS letter(s). Keep BOTH the letters and confirmation of payments received. Both should be retained in your record keeping. File your tax return based on actual receipts.
Do not wait too long. While it makes sense to wait for these IRS letters prior to filing, do not wait too long. If one is not received, file your tax return based on what you actually received.
Clarity will help file a correct tax return. By providing both the letters AND documentation of actual payments, your tax return can not only be filed correctly, but can be filed in such a way that accurate reporting does not inadvertently create a computer generated audit from the IRS.
Source: IR 2021-255
— By Nancy J. Ekrem, CPA
DME CPA Group PC
Certified Public Accountants & Business Consultants