What to know about the Child Tax Credit as NJ faces tax season

Part of the collateral damage of the showdown between President Joe Biden and West Virginia U.S. Sen. Joe Manchin over Biden's $1.9 trillion COVID-19 aid package was the elimination, effective last Friday, of monthly deposits from the federal Child Tax Credit.

The credit itself is continuing in 2022, but will only come back to families once they file taxes at the beginning of 2023. The same goes for the current tax season and the other half of last year's credit that wasn't paid out monthly.

Nicole DeRosa, senior tax manager for Florham Park-based Wiss & Co. and chairwoman of the Emerging Leaders Council for the New Jersey Society of Certified Public Accountants, said the Child Tax Credit should be nothing new to those who have kids.

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Yet even besides the short-lived monthly payment option, there are other differences in the program now compared to years past.

First of all, the amount of the credit has increased, from $2,000 per qualifying child to $3,600 for those who were age 5 or under as of the end of 2021, and $3,000 for kids age 6 through 17.

"That $500, non-refundable credit for other dependents has not changed, so in reality just the amounts were significantly increased," DeRosa said.

However, The Associated Press reported Friday that full payments for 2022 will only go to families that earned enough to owe taxes, potentially limiting the credit for the poorest Americans.

New Jerseyans who qualified for, opted into, and received the monthly payments from last July through December must notate that when they go to file their taxes this winter or spring.

"What happened is that now, instead of claiming it all with your tax return, there is now this advance payment that a lot of people have become quite familiar with," DeRosa said. "They have to be reported and reconciled on the 2021 tax return, so it's going to be very, very important for taxpayers to make sure that they are properly claiming this credit."

That could be a tricky calculation, DeRosa warned, and could cause major delays for anyone who, even unintentionally, misrepresents the amount they've already pocketed.

She said if discrepancies are noted on this or other credits, the Internal Revenue Service orders a second level of review, meaning up to a four-month backup of any applicable refund.

The IRS does not process returns with these types of credits early on in tax season, DeRosa said, so she recommends not being first in line to file.

That doesn't mean to wait until the very last minutes in mid-April — but take your time.

And most of all, be on the lookout for Letter 6419 from the IRS, which has been mailed out this month and last.

"Do not throw that letter from the IRS away," DeRosa said. "Make sure you save it and you use it, whether you're preparing your tax return on your own or whether you're having your tax return prepared by a professional."

The Associated Press contributed to this report.

Patrick Lavery is New Jersey 101.5's afternoon news anchor. Follow him on Twitter @plavery1015 or email patrick.lavery@townsquaremedia.com.