Advance Payments – 2021 Child Tax Credit

by | Jun 30, 2021 | IRS, Tax Law, Uncategorized

Who, What, When … Etc.

This should go off without a hitch! And be an absolute joy to explain to clients why their refund is smaller! And reconcile on next years tax returns! (Heavy Sarcasm)

… None the less, here are the facts.

Who is eligible for Advance Payments of the Child Tax Credit?

Advance payments of the child tax credit will be sent to eligible taxpayers beginning July 15, 2021 and will be sent monthly through December, 2021.

Generally, taxpayers who have a qualifying child and whose main home was in the United States for more than half the year are eligible for advance payments of the 2021 Child Tax Credit. The taxpayer or their spouse if married filing a joint return, must have a Social Security Number (SSN) or an ITIN. Advance payments of the 2021 child tax credit will be made to eligible taxpayers for each qualifying child that has a valid SSN.

Eligibility requirements have changed for the 2021 Child Tax Credit. For tax year 2021:

  • The maximum age requirement has been raised from 16 to 17.
  • There is no minimum income or earned income requirement.
  • The maximum income limitations have been raised. The credit begins to phase out when modified AGI is above $75,000 for single filers, $150,000 for married filing jointly and $112,000 for head of household filers. The 2021 Child tax credit is completely phased out when modified AGI exceeds $400,000 for married filing joint filers and $200,000 for all other filing statuses.

How are advance payments calculated?

The IRS will determine the amount of the advance payments by estimating the amount of the Child Tax Credit that will be claimed on a taxpayer’s 2021 tax return. The estimate of the 2021 Child Tax Credit is based on the information included on the taxpayer’s 2020 federal income tax return (or the taxpayer’s 2019 tax return if no tax return has been filed for 2020).

The total of the advance Child Tax Credit payment amounts will will equal half of the amount of the taxpayer’s estimated 2021 Child Tax Credit.  The estimated amount will be divided in to 6 monthly advance payments to the taxpayer.

Generally, the taxpayer will receive:

  • $300 for each qualifying child age 5 or under.  ($3,600 divided by half, which is $1,800. Six monthly payments of $300 for a total advance payment of $1,800.
  • $250 for each qualifying child ages 6 to 17.  ($3,000 divided by half, which is $1,500. Six monthly payments of $250 for a total advance payment of $1,500.

When?

  • Payments are scheduled to go out on July 15, August 13, September 15, October15, November 15 and December 15.
  • Payments will be disbursed automatically via check.
  • A letter informing the taxpayer how much Advance Child Tax Credit they received in 2021 will be sent to the taxpayer by January 31, 2022.
  • Visit the ACTC 2021page for more details.

IRS Tools/FAQ’s

  • Can someone unenroll? Yep… Here’s the Link

    • If clients are having trouble via the tool, they can contact the IRS at 800-908-4184.
    • The toll free number is in the top right hand corner of the Letter 6416 that they received in mid-June.

  • IRS FAQ LINK

All the best!