Because of a host of expiring tax provisions, preparers and their clients are reporting that this tax season is a source of uncertainty and anxiety, according to Accounting Today. Approximately 40 tax provisions, including the enhanced Child Tax Credit, expired in 2021, 34 at the end of the year and six after the third quarter.  

Some of the expired provisions offered relief during the pandemic and were intended to expire eventually. Others are on a list of “tax extenders” that traditionally get renewed by Congress, sometimes retroactively. Congress’s Joint Committee on Taxation updates the list on a regular basis. 

The expiration of the enhanced Child Tax Credit, in particular, is causing headaches. That provision, part of the American Rescue Plan, provided monthly advance payments of $250 to $300 per child, depending on their age, while increasing the total amount per year from $2,000 to up to $3,000 or $3,600 per child, also depending on their age. The Biden administration's proposed Build Back Better Act would have extended that enhanced credit, but it stalled in the Senate, so the limit went back to $2,000 and the monthly payments went away. 

One particular challenge arises from several different types of phaseouts for the Child Tax Credit. One applies to the pre-2021 Child Tax Credit of $2,000 for children. Others apply to the enhanced Child Tax Credit introduced last year. The credit was $3,600 for children ages 5 and under at the end of 2021, and $3,000 for children ages 6 through 17. Because the pre-2021 Child Tax Credit stopped at age 16, the phaseout for children aged 17 is new. In addition, many parents are finding out that they may need to repay some of the advance payments of the Child Tax Credit, or that their tax refund is smaller. 

In addition, many parents are upset that the advance payments have stopped. A new study found that child poverty spiked by 41 percent in January, right after the expanded Child Tax Credit expired, leaving 3.7 million more children in poverty without the monthly credit. 

According to a survey conducted by ParentsTogether, a family advocacy group, 57 percent of respondents said it has been more difficult to meet their family’s basic needs as a result of the expiration of the enhanced Child Tax Credit, and 22 percent said they have been unable to meet their family’s basic needs. More specifically, 41 percent said they had to or would need to spend their savings or other money saved for emergencies, 34 percent said they could no longer afford extracurricular activities for their children, 29 percent said they could no longer save for their children’s future, 22 percent said they can no longer afford enough food for their children, 19 percent said they could no longer afford their rent or mortgage, and 15 percent said they had to cut back on work hours because they couldn’t afford child care. 

According to Accounting Today, other provisions that expired in 2021 include credits for energy efficient investments and purchases, and a tax break that allowed individuals who claim the standard deduction to deduct up to $300 for charitable contributions and couples to deduct $600 without itemizing. 

While Congress may decide to extend some of the expiring provisions, the prospect of the midterm elections in the fall could make it difficult for members of Congress to agree. It might not be until after the election that Congress comes up with a plan, perhaps in a year-end package.