The IRS announced that the Child Tax Credit for 2021 will be raised to $3,600 for children under 6, and $3,000 for children 6 to 17 years old.
As part of the pandemic relief package passed earlier this year, qualified taxpayers will be eligible to receive advance payments on their estimated Child Tax Credit for the 2021 tax year. Here are the details:
- What is the Advance Child Tax Credit? It is a new federal program where the IRS will pay half the total credit amount in advance monthly payments beginning July 15. The payments will be paid in 6 monthly installments which will total one-half of your estimated total Child Tax Credit for the year.
- Who qualifies for the Advance Child Tax Credit? To qualify for the advance 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. Also, your main home must have been in the United States for more than half the year.
- Non-Filers: If you were not required to file a 2019 or 2020 tax return but believe you qualify for the Advance Child Tax Credit, you can enter your information by clicking the signup tool button below.
- Which children qualify? Children under the age of 18 at the end of 2021 and who have a valid social security number qualify. There are certain income limits that could disqualify you from receiving the credit.
- Can I opt-out of the Advance Child Tax Credit? The IRS has stated that you can opt-out of the advance monthly payments and receive the full credit when you file your 2021 tax return. For parents who are married and filing jointly, both spouses must unenroll. To opt-out, taxpayers will need to enter their information by clicking the update portal button below.
To stop advanced payments, families must unenroll three days before the first Thursday of the next month. To opt-out of the upcoming July 15 payment, families need to use the portal to unenroll by June 28, 2021.
Is the Advance Child Tax Credit taxable?
No. Advance Child Tax Credit payments are not income and will not be reported as income on your 2021 tax return. However, the total amount of Advance Child Tax Credit payments that you receive during 2021 is based on the IRS’s estimate of your 2021 Child Tax Credit. If the total is greater than the Child Tax Credit you are allowed to claim on your 2021 tax return, you may have to repay the excess amount on your tax return next year.
What documentation will we need to prepare your tax return?
In January 2022, the IRS will be sending Letter 6419 to anyone who received the Advance Child Tax Credit. Please include a copy of this letter with your other tax documents next year so we can ensure the correct amount is reported on your 2021 tax return.
Please do not hesitate to reach out to us with your questions and concerns. Thank you!