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Advance Child Tax Credit Payments in 2021

Advance Child Tax Credit Payments in 2021

If you have children under 18, you may have noticed some money being deposited in your bank account by the federal government. Keep reading to find out what you need to know about the Advance Child Tax Credit Payments in 2021.

“Huh??” you say?  Let’s bring you up to speed…

Advance Child Tax Credit (“CTC”) payments are early payments (up to $300/month) of half of the estimated amount of the child Tax Credit that you would normally claim on your 2021 tax return.  The full CTC is $3,600 (for a child under 6) or $3,000 (for a child aged 6 to 17).

The advance payments started in July.  If you are eligible and the IRS has processed your 2020 (or 2019) tax return, your advance payment amounts are based on the information on that return.   You can claim the other half when you file your 2021 income tax return.

“So what do I need to do?”

Advance payments are sent automatically to eligible people.  If the IRS has your tax information, you don’t need to do anything.  However, if your dependents changed (i.e., you became a new parent) 2021, the IRS doesn’t yet know this.  You will be able to claim the full 2021 Child Tax Credit of up to $3,600 when you file your 2021 taxes in 2022.

“How do I know if I qualify?”

To qualify for advance payments of the Child Tax Credit, 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 with the Non-Filers
  • Given the IRS your information in 2021 with the Non-Filer form
  • Lived in a main home in the United States for more than half the year or filed 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.

Check here to see if you’re eligible for advance payments.

“My bank account information or my mailing address changed since I filed my last tax return. How do I make sure the money gets to me?”

Go to the IRS Child Tax Credit Update Portal, which allows you to:

  • check to see if you are enrolled for advance payments,
  • choose to opt out of these monthly advanced payments,
  • check status of payments,
  • update direct deposit information,
  • switch from paper check to direct deposit,
  • update mailing address,
  • and stop payments anytime.

“Hmm…  Money in my account sure sounds good.  Is there a reason why I might want to unenroll in the advance monthly Child Tax Credit?

You may want to unenroll from receiving advance Child Tax Credit payments for several reasons. Consider opting out if one of these situations applies to you:

  • If your main home was outside of the U.S. for more than half of 2021. In this case you are not eligible for the Child Tax Credit. You may want to unenroll rather than paying that money back at tax time.
  • You’re like some people and use your tax refund as a “forced savings” and prefer a nice big lump sum refund at tax time.
  • You are a single parent who claimed your child as a dependent previously, but your child’s other parent is claiming them for the 2021 tax year. You may want to opt out so the other parent can receive the full Child Tax Credit when they file their 2021 taxes.
  • Your actual 2021 income is more than the income reported on your latest tax filings (tax year 2020 or 2019) that the IRS used to determine your eligibility for the advance monthly payments and it exceeds the income thresholds for 2021 Child Tax Credit, then it is possible that you are not eligible for the full amount of the credit and you may have to pay a portion back if you received the advance payments. The earnings thresholds for CTC in 2021 are:
    • $75,000 for parents filing single or married filing separately,
    • $112,500 for parents filing head of household
    • $150,000 for parents married filing jointly or a parent filing as a surviving spouse.
    • Above these income thresholds, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every $1,000.

How to unenroll

If you would like to unenroll from the advance monthly CTC payments, use the  IRS The Child Tax Credit Update Portal. You can then claim the full CTC when you file your 2021 taxes.

Angie Noll
angien@reconciledsolutions.net