USC Leventhal School of Accounting Associate Professor Greg Kling joins Yahoo Finance Live to discuss the steps for filing the Child Tax Credit, the IRS not having enough resources and the outlook for the Child Tax Credit. child tax this season.
Brad Smith: The IRS has come out with a new warning for certain taxpayers receiving the child tax credit. We break down what you need to know as part of our Taxes Made Simple series presented by Tax Act. And we joined today, we have Greg Kling, associate professor from USC Leventhal School of Accounting.
Greg, great to have you here. Help us break this down first, and what is the IRS warning to so many taxpayers out there?
GREG KLING: Sure. Glad to do that, Brad. Thank you for inviting me this morning. So the problem is that taxpayers would have received installments on their 2021 child tax credit. They would have had those from July to December.
So when taxpayers file their 2021 tax return, what they have to do is make a calculation and then subtract the installments received. Well, what the IRS does is they send out a letter to everybody – it’s called the 6419 letter – where the IRS basically says, here’s how much you got paid. This is what you must put on your tax return. So what’s the problem ? The problem is that if you don’t receive the letter and the number you put on your return is wrong, you may experience delays in processing your return, which obviously isn’t a good thing if you expect a refund.
AKIKO FUJITA: So walk me through this checklist that parents who got this child tax credit need to make sure they follow to avoid this delay.
GREG KLING: Yeah, Akiko, good point. So the idea is that on the 6419 letter– and, in fact, for married couples, we have to note that each person is probably going to get a letter– it’s just the idea of whether your records are good and you know exactly how much you have, so you know what you have. But if you lose even a few dollars, the problem is that your performance will just stop. And that’s obviously not a good thing.
Brad Smith: Greg, how many households is this expected to impact?
GREG KLING: Oh, I mean, it’s in the millions. I mean, when you think of all the taxpayers who are eligible for the child tax credit, I mean, it’s a huge problem. This impacts millions of taxpayers.
AKIKO FUJITA: I mean, tell me about the larger challenge that you’re seeing right now, which is, number one, that the IRS has to adapt to this, but also the fact that it’s already facing a backlog due of a shortage.
GREG KLING: Yeah. I mean, just to complicate things, you talk about… I would just tell everyone to be patient with the taxman. Maybe it sounds a little funny, but you have to be patient. They are still reeling from the COVID legislation and trying to implement it, in addition to not having enough resources. I hear from customers and colleagues saying they still haven’t processed returns even from 2020.
And for you who may be getting notices of balances due, and you’re calling the IRS, and you’re having really long wait times, or maybe you can’t even get through, unfortunately, that’s very current at the moment.
AKIKO FUJITA: Patience is rare, but a good reminder that they need to file early and then, of course, be patient with the IRS. Some good marks there. Greg Kling, USC Leventhal School of Accounting Associate Professor, thank you for joining us today.