By Christine Tran, 2021 Get It Back Campaign Intern
Congress has passed several economic relief measures to support people through the COVID-19 pandemic. Because of these new laws, this tax season comes with many important changes. Here’s what you need to know to get the most out of your tax refund this year.
Some economic relief measures may lead to a bigger tax refund this year, even if you don’t normally file taxes. Here are the highlights:
- Child Tax Credit: Nearly every family is eligible for the expanded Child Tax Credit, including families without recent income and who don’t usually file taxes. If you received advance payments in 2021, you need to file a tax return to get your remaining credit. If you didn’t get advance payments, you can get the full credit when you file your taxes.
- Earned Income Tax Credit: More people than ever before can get this expanded credit. If you earn money from a job, this credit can provide money back at tax time or lower the federal taxes you owe.
- Child and Dependent Care Credit: This tax credit is fully refundable for the first time. It helps offset expenses you pay for childcare or the care of an adult dependent who is unable to care for themselves.
- Stimulus checks: If you didn’t receive the full amounts of the 3 stimulus checks the government issued in 2020 and 2021, you can get your payments when you file taxes.
- Unemployment benefits: Unemployment benefits are taxable and need to be reported.
- ‘Lookback’ rule: The ‘lookback’ may help you get a bigger Earned Income Tax Credit refund if you earned more in 2019 than you did in 2021.
Keep reading to learn more about tax credits, stimulus checks, unemployment benefits, the lookback rule, and how they can affect your taxes this year.
Child Tax Credit (CTC)
The expanded Child Tax Credit is worth up to $3,600 for each child under age 6 and $3,000 for each child ages 6-17. The government delivered half of the Child Tax Credit through advance payments from July 2021 to December 2021. To claim the other half of your Child Tax Credit, you will need to file a 2021 tax return (which you file in 2022). You may need to refer to IRS Letter 6419 (sent in January 2022), which shows the total amount of advance payments you have already received. This information may be helpful to determine the remaining credit that you can claim when you file your taxes in 2022.
If you didn’t receive advance payments, you can claim the full amount of your Child Tax Credit by filing a 2021 tax return (which you file in 2022).
Read What’s New about the Child Tax Credit in 2021 to learn about your eligibility, the amount of money you can get, and how to get it.
Earned Income Tax Credit (EITC)
More people than ever before will qualify for the Earned Income Tax Credit because of the recent expansion. For the first time, adults without kids at home are eligible for a credit worth up to $1,500. This includes people ages 19 – 24 (who are not students) and over 64 who work and weren’t eligible before.
In addition, many eligible families with children will get a slightly larger EITC. When you file your taxes in 2022, the credit is worth a maximum of $6,728.
Read What is the Earned Income Tax Credit? to learn about your eligibility, how much the credit is worth, and how to get it.
Child and Dependent Care Tax Credit (CDCTC)
If you paid for childcare so you can work or look for work, you can claim the Child and Dependent Care Tax Credit. You can also claim this credit if you pay for the care of an adult dependent who is unable to care for themselves so that you can work or look for work.
This tax credit usually can reduce the amount of federal taxes you owe. For 2022 only, the tax credit is worth more than ever and is fully refundable. This means that if you don’t owe any taxes, you can get the money as part of your tax refund.
To get the credit, you will need to know how much you spent on childcare in 2021. You can refer to bank account statements, receipts, or any documentation that tracked your expenses.
Read Child and Dependent Care Credit to learn more about your eligibility, the amount of money you can get, and how to get it.
Most people received their first and second stimulus checks in 2020 and early 2021. A third stimulus check was passed and distributed throughout 2021. The stimulus checks are not considered income and you do not have to pay taxes on them or include them on your tax return.
If you didn’t get your first, second, and/or third stimulus check or didn’t get the full amount that you are eligible for, you can claim them as part of your tax refund. The IRS refers to stimulus checks as Economic Impact Payments or EIPs. The IRS sent notices with the amount of the stimulus check sent to you:
- IRS Notice 1444: shows the amount of your first stimulus check (EIP1)
- IRS Notice 1444-B: shows the amount of your second stimulus check (EIP2)
- IRS Notice 1444-C: shows the amount of your third stimulus check (EIP3)
To claim the rest of the stimulus checks on your tax return, it is helpful to know the full amount that you already received. (You can still claim your stimulus payments if you didn’t receive any of the checks or you cannot remember the amounts.)
Read What do I do if I didn’t get my stimulus checks? to learn how to claim your stimulus checks as a tax refund when you file your taxes. You will need to file a 2020 tax return to get the first and second stimulus checks and a 2021 tax return to get the third stimulus check.
Unemployment Benefits and Form 1099-G
If you claimed unemployment benefits in 2021, then you should receive a Form 1099-G, Certain Government Payments from your state unemployment office by the end of January 2022. Your Form 1099-G will show the total amount of unemployment benefits you have received, along with any state and federal taxes you had withheld.
Unemployment benefits are considered taxable income, so you will need to report unemployment on your federal tax return.
If you received a Form 1099-G, but didn’t claim unemployment benefits, then you may be a victim of identity theft and fraud. Contact your state unemployment office to report and correct this issue.
The Lookback Provision
To continue to support economic relief from the COVID-19 pandemic, Congress passed a ‘lookback rule’ which means if you earned less in 2021 then you did in 2019, you can use either your 2019 or 2021 income to calculate your Earned Income Tax Credit (EITC)—whichever one gets you the most money back.
You will need your 2019 tax return to take advantage of the lookback. If you earned less in 2021 than in 2019, then you can choose which income to use. If your 2021 earnings were higher than in 2019, you must use your 2021 income.
If you are filing taxes on your own, read about how you can find your earned income to take advantage of the lookback.
Need Help Filing Your Taxes?
- Visit Code for America’s Get Your Refund website to connect with an IRS-certified volunteer that can help you file your taxes for free.
- Contact your local Volunteer Income Tax Assistance (VITA) or AARP Foundation’s Tax-Aide site to get free tax help from an IRS-certified volunteer.
- Learn more about free tax filing options by reading this Free Tax Filing page.