The Child Tax Credit expansion may have expired but it’s not gone completely — and it’s proving to be a curveball on tax returns. Many people will see their refunds reduced or even eliminated, while others will get a windfall.
Children wait for Gov. Michelle Lujan Grisham to make an announcement about child care subsidies in Santa Fe, N.M. on July 1. | Cedar Attanasio/AP PhotoDemocrats’ expansion of the Child Tax Credit may have expired but it’s not gone completely. More than 40 million Americans now must contend with it on their annual tax returns.
The effects on refunds could be a touchy issue for Democrats, potentially putting them on the defensive over one of the biggest achievements of the Biden administration. The situation for Democrats is reminiscent of the position Republicans were in during the first filing season after their 2017 tax overhaul, when they came under fire because the size of refunds initially dropped before later rebounding to roughly historic levels.
“If everything else was the same, your refund is going to be less,” says Bill Nemeth, a longtime tax practitioner in Atlanta, Ga.The IRS sent payments based on what people reported on their 2020 returns. But it’s common for divorced couples to trade kids each year for tax purposes. At the same time, the size of the average refund is up 14 percent, an increase that has some observers scratching their heads. There are a range of possible explanations, including the likelihood that people expecting big payments tend to file earlier.
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