If you have children under the age of 18 you may have received a letter from the IRS recently. This letter is in regards to the Advance Child Tax Credit Payments. The letter was mailed to families who may be eligible based on information they included in either their 2019 or 2020 federal income tax return. A second letter listing an estimate of the monthly payment may be received in the near future.
These payments are scheduled to begin July 15th. Most families don’t need to take any action to get their payment. The IRS will calculate the payment amount based on the 2020 tax return. If that return is not available, either because it has not yet been filed or it has not yet been processed, the IRS will determine the payment amount using the 2019 tax return.
Eligible families will begin receiving advance payments, either by direct deposit or by check. The payment will be up to $300/month for each qualifying child under age 6 and up to $250/month for each qualifying child ages 6 – 17. The payments will be issued on the following dates:
- July 15
- Aug 13
- Sept 15
- Oct 15
- Nov 15
- Dec 15
Caution: If the total advance payment is greater than the Child Tax Credit amount on your 2021 tax return, you may have to repay the excess amount. Any excess credit may be the result of changes in your income, marital status, or the number of qualifying children.
Another concern is that many clients who receive the advance payments may owe tax when they file their 2021 tax returns because they rely on this credit to supplement the amount of withholding from their paychecks. Others use this credit/refund from their tax returns to accomplish goals such as: paying down debt, taking a family vacation, starting a home improvement project, etc.
The IRS has created a special Advance Child Tax Credit 2021 page at: www.IRS.gov/childtaxcredit2021 . At this site, there will be a tool, the Child Tax Credit Update Portal, where you can un-enroll or opt-out of the advance payments.
This is an important decision that could affect the outcome of your 2021 tax return so please contact us at 208-687-0508 or email@example.com to set up a paid appointment to discuss how this may affect you. If you choose to receive the advance payment, please keep good records (such as copies of IRS checks or monthly bank statements showing the deposit). The payments will have to be reconciled on your 2021 tax return.