Let us help clarify. With the world still attempting to recover economically, the U.S. is endeavoring to bolster her citizens by providing continued support with the American Rescue Plan, a $1.9 trillion-dollar stimulus package with many features.
One component of the A.R.P. is the advance payment of a portion of the Child Tax Credit (CTC).
From the IRS.gov website:
“Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS has processed your 2020 tax return or 2019 tax return, these monthly payments will be made starting in July and through December 2021, based on the information contained in that return.”
What does that mean for you?
In a nutshell, the IRS is providing those with qualifying children monthly payments for HALF the amount of child tax credit they would be credited with on their 2021 return IF they have qualifying children on their 2020 tax return.
-Children under 5 at the end of 2021 are eligible for HALF of $3,600 as advanced payments
-Children ages 6 through 17 at the end of 2021 are eligible for HALF of $3,000 as advance payments
These payments will be divided by 6 months, to give you a monthly amount for each qualifying child.
Much like the Stimulus checks were, the CTC amount you could receive is based on your 2020* income. *(if you have not filed 2020, the IRS will use your 2019 return):
-Single filers (or Married filing separate) with income of $75k or less
-Married filing jointly with income of less than $150k
-HOH with income of less than $112,500
If your household income for your filing status exceeds the above amounts, your Child Tax Credit reduces per qualifying child.
These advance payments are expected to help families who may be struggling to make ends meet while much of the nation is still working on getting back to normal. You can check to see if you are eligible for these payments using the IRS’s Eligibility Assistant Tool. If you have already filed your 2020 return, and have qualifying children listed on your return, you do not need to do anything at this time UNLESS
you want to opt out of the monthly payments, to receive the full CTC amount on your 2021 return
Why opt out? Unlike the stimulus checks, these advance payments WILL reduce any refund you typically receive, increase a balance due, or could cause you to owe when you normally receive a refund. to opt out, or if any of your information changed in 2021 (i.e. banking info) you can do so using the Child Tax Credit Update Portal to help those make updates.*
*This tool is not for updating the IRS to any children BORN in 2021; the tool will update in late summer to be able to account for this type of change.*
Cape Fear Tax is committed to guiding our clients through the ever-changing requirements that affect returns, and your daily life. Call us today for more assistance!