How 2021 Covid-19 Relief May Affect Your 2022 Finances
Much of the Covid-19 assistance provided by the federal government to individuals has flowed throughout 2020 and 2021 – but it can still affect your finances in 2022.
The third stimulus check, changes to UI, the break in federal student loans and the improved child tax credit were all part of the government’s aid package last year. Other than the loan hiatus, none of the other measures apply in 2022 (at least so far).
But they could impact your tax bill this year, and as a result, many families’ incomes could be lower than normal. Here’s what to keep in mind about Covid-19 relief in 2022.
Withholding tax credit for children
The enhanced child tax credit has not been extended until 2022, but the 2021 payments will still impact your tax bill.
The credit increased from $ 2,000 to $ 3,000 to $ 3,600 per child in 2021. Many families received half of the largest payment throughout 2021 in monthly installments valued at from $ 250 to $ 300 per child. Everyone will receive the other half (and families who have chosen not to benefit from the advance payments will receive the full amount of the credit) when they file their 2021 tax return.
Overall, many families received a lot more money. But because half of the payment was made up front for the first time, families may receive a lower tax refund than they are used to.
A family with a 10-year-old eligible for the full $ 3,000, for example, could have received $ 1,500 throughout 2021. This means that they can claim the additional $ 1,500 on their tax return. that’s less than the $ 2,000 she usually claims. With more children, the difference grows even bigger.
Additionally, the CTC was based on income information for 2020. If a parent’s or household’s income was significantly different in 2021, they might have to repay part of the credit.
The Democrats’ US bailout has removed federal taxes on up to $ 10,200 in unemployment benefits per person for 2020. But for 2021, no similar relief is offered yet. Filers will have to pay benefit taxes as usual.
Unemployment has rebounded sharply since the start of the coronavirus pandemic. But around 25 million people have still applied for unemployment benefits at some point in 2021. If they had not withheld taxes, or too little, they could owe some of that money in tax season.
Good news: Those who are eligible to receive the third coronavirus stimulus check, which was paid out last year but never received it, may finally get their payment when they file their taxes in 2021.
Payments were worth up to $ 1,400 for each eligible person and their dependents. Those who did not receive one, or received less than they should have, can claim the recovery rebate credit on their 2021 returns. This is true even for people who do not normally file a tax return. .
Third payments were initially based on 2019 income to speed up the disbursement process, although technically they should be based on 2020 income. To rectify the situation, the IRS began sending additional payments to those who earned. too many in 2019 to qualify, but lost income in 2020.
However, there may still be people eligible for the check who did not receive it or who received too little. For example, if an eligible individual had a child in 2021, they can now claim it based on their 2021 tax return.
The IRS sends a letter about stimulus payments to taxpayers in late January, which can be used to determine if they are eligible for more money.
Those who earned less in 2019 than in 2020 will not have to reimburse the IRS for the stimulus money.