It's estimated that around 1.5 million people will be getting "surprise" tax refunds.
If you're a family with kids under 13 then you may be eligible for a 'surprise' tax refund up to 50% of $8,000 for childcare expenses.
How does it work?
This is part of the American Recovery Act of 2021.
The child and dependent care tax credit is a credit allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work.
Who is eligible and who qualifies?
If you (or your spouse, if filing taxes jointly) paid someone to care for one or more qualifying people while you looked for work and your income qualifies, then you may be eligible.
According to the IRS website, a qualifying person is:
Your dependent who is under age 13 when the care is provided;
Your spouse, if your spouse isn’t mentally or physically able to care for himself or herself and lives with you for more than half the year; and
A person who isn’t mentally or physically able to care for himself or herself, lives with you for more than half the year, and either:
Is your dependent, OR
Would have been your dependent except that (i) he or she receives more than a certain gross income amount ($4,300 in 2021), (ii) he or she files a joint return, or (iii) you (or your spouse in the case of a joint return) can be claimed as a dependent on someone else’s return.
What qualifies as work-related expenses?
This is what you pay someone to care for qualifying individuals while you look for work.
The IRS says:
Your work can be for others or in your own business or partnership. It can be full or part-time. It also includes actively looking for work. However, if you don’t find a job and have no earned income for the year, you can’t take this credit.
Does it just automatically deposit into your bank account?
That's what reports are saying. What would you do with the money if a 'surprise' tax refund hit your bank account?
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