The following information pertains to the Advanced Child Tax Credit Payments that the IRS is going to begin issuing Mid-July. Below you will find some of the most frequently asked questions, and answers to those questions, along with some information that you may find helpful.
DO I HAVE TO DO ANYTHING TO START RECEIVING THE ADVANCED CHILD TAX CREDIT PAYMENTS?
NO. The IRS will determine your eligibility for these advanced payments, based on your qualifications in your 2020 Tax Return and will begin issuing them Mid-July.
WHAT IF MY 2020 TAX RETURN HAS NOT BEEN FILED OR PROCESSED YET?
If the IRS has not processed your 2020 tax return as of the payment determination date for a monthly Advanced Child Tax Credit payment, we will determine the amount of that Advance Child Tax Credit payment based on information shown on your 2019 tax return.
CAN I OPT OUT OF THESE ADVANCED CHILD TAX CREDIT PAYMENTS AND/OR UPDATE MY INFORMATION?
If you prefer not to receive monthly Advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you can unenroll through the Child Tax Credit Update Portal (CTC UP). This portal (CTC UP) will allow you to unenroll before the first advance Child Tax Credit payment is made.
To stop Advance Child Tax Credit payments, you must unenroll 3 days before the first Thursday of next month by 11:59 p.m. Eastern Time.
**If you file a joint return, both the Taxpayer AND Spouse must un-enroll. if you do not both unenroll, you will get half of the joint payment you were supposed to receive with your spouse.
** You cannot re-enroll at this time. Unenrollment is a one-time action. You will be able to re-enroll starting in late September 2021.
CAN I CHANGE AND/OR UPDATE MY INFORMATION?
You will be able to update certain information in the coming months:
CHILD TAX CREDIT 2021:
For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
$3,600 for children ages 5 and under at the end of 2021; and
$3,000 for children ages 6 through 17 at the end of 2021.
Note: The $500 nonrefundable Credit for Other Dependents amount has not changed.
HOW MUCH WILL I RECEIVE IN ADVANCED CHILD TAX CREDIT PAYMENTS?
Your total Advance Child Tax Credit payments amounts will equal half of the amount of your estimated 2021 Child Tax Credit. This amount is then divided into monthly advance payments to you.
As a result:
For each qualifying child ages 5 or younger, generally you will receive $300.
That is determined by dividing $3,600 (the FULL amount of the Child Tax Credit) in half, which is $1,800. Divide that $1800 into SIX monthly payments. ($300 per month)
For each qualifying child ages 6 to 17, generally, you will receive $250.
That is determined by dividing $3,000 (The FULL amount of the Child Tax Credit) in half, which is $1,500. Divide that $1500 into SIX monthly payments. ($250 per month)
WHEN WILL I RECEIVE THE ADVANCED CHILD TAX CREDIT PAYMENTS?
Advance Child Tax Credit payments will be disbursed in monthly installments starting July 15, 2021, through December 2021.
HOW WILL I RECEIVE THE ADVANCED CHILD TAX CREDIT PAYMENTS?
Your 2020 tax return.
Your 2019 tax return, including information you entered into the Non-Filer tool on IRS.gov in 2020.
Information you entered on Get My Payment in 2020.
A federal agency that provides you benefits, such as: Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board.
If we do not have bank account information to issue you a direct deposit, we will send your Advanced Child Tax Credit payments by mail.
ARE THE ADVANCED CHILD TAX CREDIT PAYMENTS TAXABLE?
NO, they are not taxable, but you will need the amounts that you received in order to complete your 2021 Tax Return.
CAN MY ADVANCED CHILD TAX CREDIT PAYMENTS BE OFFSET FOR PAST DUE DEBTS?
These payments will not be reduced (that is, offset) for overdue taxes from previous years or other federal or state debts that you owe. They will also not be offset for past due child support.
However, Advance Child Tax Credit payments are not exempt from garnishment by non-federal creditors under federal law. Therefore, to the extent permitted by the laws of your state and local government, your advance Child Tax Credit payments may be subject to garnishment by your state, local government, and private creditors, including pursuant to a court order involving a non-federal party (which can include fines related to a crime, administrative court fees, restitution, and other court-ordered debts).
** If you have reported that you’re a victim of tax-related identity theft, the IRS will not disburse advance Child Tax Credit payments to you until your tax-related identity theft issue has been resolved.
DO I HAVE TO KEEP TRACK OF THE ADVANCED CHILD TAX CREDIT PAYMENTS THAT I RECEIVE?
YES. You will have to keep track of the Advance Child Tax Credit payments that you received, and you will need to know the amounts that were received in order to reconcile the credit on your 2021 Tax Return.
In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season.
WILL I HAVE TO REPAY THESE ADVANCED CHILD TAX CREDIT PAYMENTS?
You will not have to REPAY these Advanced Child Tax Credit Payments; However, you will have to reconcile the amount that you received in advanced with the amount that you qualify on your 2021 Tax Return. So, there is a possibility that your credit can be reduced on your tax return, which can result in a higher liability.
Keep in mind, these are ADVANCED PAYMENTS. This means that the credit that you receive in your refund/on your tax return will be less the amounts that you received in Advance. This is all determined by the amount of Child Tax Credit you qualify for on your 2021 Tax Return.
The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021.
The first phaseout can reduce the Child Tax Credit back down to $2,000 per child.
That is, the first phaseout step can reduce only the $1,600 increase for qualifying children ages 5 and under, and the $1,000 increase for qualifying children ages 6 through 17, at the end of 2021.
The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
$150,000 if married and filing a joint return or if filing as a qualifying widow or widower.
$112,500 if filing as head of household.
$75,000 if you are a single filer or are married and filing a separate return.
**The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child.
The Child Tax Credit will not begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
$400,000 if married and filing a joint return; or
$200,000 for all other filing statuses.
**The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
SHOULD I OPT OUT?
It depends. You should speak with your accountant to discuss your individual circumstances.
HOW WILL THIS CHANGE MY RETURN/REFUND?
If you opt-out and are entitled to the additional CTC on your 2021 tax return, you will receive the entitled amount on your 2021 tax return.
If you do not opt-out, you may receive more than you are entitled to and may need to pay back a portion or all of the credit depending on several factors.