Yahoo Finance Your Tax Refund Might Be Smaller This Year — Here's Why, According to Experts
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Tax season is here, but some people may be getting a smaller refund than they're used to, according to tax experts.
"There's a lot of changes this year — especially for families with children," Jean Pliakas of Rhode Island's Liberty Tax told ABC affiliate WJAR.
The change that could have the biggest impact on tax returns this year is the expanded child tax credit, a key part of President Joe Biden's American Rescue Plan, which began hitting accounts in July.
Although the plan increased the amount families can receive — upping maximum child tax credit to $3,600 for kids under 6, and $3,000 per child for kids ages 6 to 17 — the monthly payments were advances taken from the amount normally given annually through tax refunds.
As a result, families that chose not to opt out of the monthly payments will only be able to claim about half of their usual child tax credit, which could translate into a smaller return, according to CBS News.
"A lot of people will get their refunds and they won't get as much as anticipated," Toby Mathis, tax expert and founding partner of Anderson Law Group, told the outlet. "The people it'll hurt are those who are anticipating the full amount, unaware that the money they got [in 2021] was a prepayment of the tax credit."
RELATED: Should You Opt Out of Monthly Child Tax Credit Payments? What You Need to Know
As an example, families that qualified for a $3,000 tax credit under the expanded plan would have already claimed $1,500 in advance payments, certified financial planner Tommy Lucas told CNBC.
Assuming the family did not have any changes in income, the amount would be $500 less than the $2,000 credit they would have received the previous year, Lucas explained, noting that families with multiple children could face even bigger changes to their usual refund.
"It's going to be a shock," Lucas told the outlet. "It could be the difference between someone getting a small refund and owing a lot."
RELATED VIDEO: Child Tax Credit Payments Will Start Hitting Accounts on July 15 — What You Need to Know
On the flip side, families that chose to delay their monthly payments from July to December should be able to receive the rest of their eligible maximum amount once they file their taxes.
"There's evidence that shows that some people really like getting that large tax refund, and can use it as an opportunity to purchase a large household item like a refrigerator or put together first and last month's rent so they can move," Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, previously told CNBC.
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People who collected unemployment benefits last year could also be in for a surprise.
Although unemployment benefits usually count as taxable income, last year, Congress waived federal tax on up to $10,200 of benefits collected in 2020, according to CNBC.
However, a similar tax break will not be available this year, meaning that households that either did not withhold federal tax from their payments, or did not withhold enough, may either get less of a refund or owe money this tax season, per the outlet.
The IRS is now accepting returns, and the deadline for filing tax returns this year is April 18.
