child tax credit / income tax / income tax refund / taxes

2021 Federal Taxes: Expanded child Tax Credits and Child-Care Flexible Spending Accounts

 Q: (True or false): Taxpayers who got direct deposits of 2021 child tax credits last year could have lower refunds or higher taxes due than expected on returns they’re preparing now.

A: True. Millions of taxpayers received partial prepayments of expanded child credits for 2021 last year via direct deposit. As a result, these amounts won’t be available to boost refunds or lower a tax balance due, and many filers could be in for bad surprises when they complete their 2021 returns.

Q: (True or false): I underfunded the child-care Flexible Spending Account offered by my company last year because of pandemic uncertainties. But when the day-care center stayed open, I spent thousands of dollars on child care and now I don’t get a tax break.

A: False. Just for 2021, Congress greatly expanded the child- and dependent-care tax credit so it applies to 50% of qualified expenses up to $16,000 for up to two children. Many parents aren’t aware of this expansion.

Thanks to Laura Saunders writing for The Wall Street Journal, Feb. 26-27, 2022. 

Source: Financial Planning for Women