Important changes to the Child Tax Credit will help many families get advance payments of the credit starting this
summer. The IRS will pay half the total credit amount in advance monthly payments beginning July 15. You will claim
the other half when you file your 2021 income tax return.
These changes apply to tax year 2021 only.
Advance Child Tax Credit Payments
To qualify for advance Child Tax Credit payments, you and your spouse, if you filed a joint return, must have:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return, or
- Given the IRS your information in 2020 to receive the economic impact payment using the Non-Filers: Enter Payment Info Here tool, and
- A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year, and
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number, and
- Made less than certain income limits.
The IRS will use the information you provided to determine if you qualify and automatically enroll you for advance payments. You do not need to take any additional action to get advance payments.
Caution. The total amount of the advance Child Tax Credit payments that you receive during 2021 is based on the IRS’s estimate of your 2021 Child Tax Credit.
Repayment Protection Safe Harbor.
You may not have to repay some or all of any excess advance Child Tax Credit amount if the excess payment is caused by a change in the number of qualifying children and your income is below a specified amount for your filing status. The maximum amount of repayment protection is $2,000 for each qualifying child that the IRS took into account
when estimating your advance Child Tax Credit. You qualify for the maximum amount if your modified adjusted gross
income (AGI) is at or below the following amounts based on the filing status for your 2021 income tax return.
- $60,000 if you are married and filing a joint return or filing as a qualifying widow(er).
- $50,000 if you are filing as head of household.
- $40,000 if you are a single filer or married and filing a separate return.
As your income increases over the above threshold amount, the amount of the repayment protection decreases. You will not qualify for any repayment protection once your modified AGI reaches the following levels.
- $120,000 if you are married and filing a joint return or filing as a qualifying widow(er).
- $100,000 if you are filing as head of household.
- $80,000 if you are a single filer or married and filing a separate return
Child Tax Credit Update Portal
Use the IRS Child Tax Credit Update Portal (CTC UP) throughout 2021 to help ensure the IRS has the most up-to-date information about your eligibility for the 2021 Child Tax Credit and to minimize any potential excess payment.
Payments Start July 15, 2021
- Eligible families can receive advance payments of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.
- Advance payments begin July 15 and will be sent monthly through December 15 without any further action.
- You can benefit from the credit even if you do not have earned income or you do not owe any income taxes.
- The credit includes children who turn age 17 in 2021.
- The tax credit is expanded to include advance payments for 2021 only.
Haven’t Filed Yet?
File your tax return as soon as possible. For people not required to file a tax return and who did not file in 2019 or
2020, visit the special IRS Non-filers: Submit Your Information tool for more details and quickly register. You may qualify for the Child Tax Credit and economic impact payments.
Takeaways
There is a lot of discussion about this COVID change but limited details from the IRS so far. We have been counseling a lot of our clients to Opt-Out of the direct payments unless a major need for the family. And you can Opt-Out, well, sorta! The IRS has said we can, but as of today’s IRS website(June 16, 2021), we are told they are still working on it. Unenroll: If you do not want to receive an advance payment of the 2021 Child Tax Credit, you can unenroll from receiving the payments at the Child Tax Credit Update Portal (CTC UP) when it becomes active.
If you have any questions or just want to talk about the Advance Child Tax Credit, contact us at 509-543-7600 or send a request HERE.
June 2021
This blog does not provide legal, financial, accounting, or tax advice. This blog provides practical information on the subject matter. The content on this blog is “as is” and carries no warranties. TaxMedics does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. Please contact us directly to discuss how this information may be used based on your actual facts and circumstances.