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What Americans should know about accounting the Child Tax Credit

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USC Leventhal School of Accounting Associate Professor Greg Kling joins Yahoo Finance Live to discuss the steps for child tax credit filing, the IRS not having enough resources, and the outlook for the child tax credit this season.

Video Transcript

BRAD SMITH: The IRS is out with a new warning for some taxpayers receiving the child tax credit. We're breaking down what you need to know as part of our Taxes Made Simple series presented by Tax Act. And joining us today, we've got Greg Kling, who is the USC Leventhal School of Accounting Associate Professor joining us.

Greg, great to have you here. Help us break this down first and foremost, and what's the IRS' warning for so many of the taxpayers that are out there?

GREG KLING: Sure. Happy to do that, Brad. Thanks for having me this morning. So the issue is that taxpayers would have received advance payments on their 2021 child tax credit. They would have gotten those from July through December.

And so when taxpayers file their 2021 tax returns, what they need to do is do a calculation and then subtract from that the advance payments received. Well, what IRS is doing is they're sending out a letter to everybody-- it's called letter 6419-- where IRS is basically saying, here's how much you got paid. This is what you need to put on your tax return. So what's the issue? The issue is if you don't get the letter and the number that you put on your return is wrong, you may experience delays in getting your return processed, which obviously is not a good thing if you're expecting a refund.

AKIKO FUJITA: So walk me through that checklist that especially those parents who got that child tax credit need to make sure of so they don't get that delay.

GREG KLING: Yeah, Akiko, good point. So the idea is that on the 6419 letter-- and, in fact, for married couples, we should note that each person is probably going to get a letter-- it's just the idea of if your records are good and you know exactly how much you got, then you know what you got. But if you're off even by a few dollars, the concern is your return's just going to get in a holding pattern. And that's obviously not a good thing.

BRAD SMITH: Greg, how many households is this anticipated to kind of have an impact on?

GREG KLING: Oh, I mean, it's in the millions. I mean, when we think about all of the taxpayers who are eligible for the child tax credit, I mean, this is a huge issue. This is impacting millions of taxpayers.

AKIKO FUJITA: I mean, speak to me about the broader challenge that you're seeing right now, which is, number one, IRS having to adjust to this, but also the fact that they're already facing a backlog because of a shortage.

GREG KLING: Yeah. I mean, just to compound the point is you're talking about-- I would just tell everybody you've got to be patient with the IRS. Maybe that sounds a little funny, but you've got to be patient. They are still reeling from COVID legislation and trying to get that implemented, on top of that not having enough resources. I'm hearing from clients and colleagues that they still haven't processed returns from even 2020.

And for you folks who might be getting notices of balances due, and you're calling IRS, and you're experiencing very long wait times, or maybe not even being able to get through, unfortunately, that's very common right now.

AKIKO FUJITA: Patience in short supply, but a good reminder they're to file early and then, of course, be patient with the IRS. Some good notes there. Greg Kling, USC Leventhal School of Accounting Associate Professor, appreciate you joining us today.