Advance Child Tax Credit Payments

On July 12, 2021 millions of American families received their first Child Tax Credit payment. This new installment program is a 50% advance of your estimated credit for the current tax year. Under the current guidelines, taxpayers that qualified for the child tax credit in the prior tax year will receive a payment each month for the rest of the year. Curious how this affects you? Let’s take a moment to walk through some of the things you need to know.

How do these payments work?

Each qualifying taxpayer will receive six payments throughout the remainder of the year. The payments are a 50% advance of the taxpayer’s estimated 2021 child tax credit. The remaining 50% of the credit will be claimed on the filing of the taxpayer’s 2021 income tax return. In January 2022, the IRS will send taxpayers that received advance payments a notice (called Letter 6419) with the total amount received in 2021. Please hold on to this notice, you will need to provide this to your tax preparer.

Is it possible to opt out of getting the credit early?

Yes. If you choose to opt out, or to pause your next payment you must do so by August 2, 2021. For taxpayers that are married filing jointly, both spouses must opt out.

Why would someone opt out?

There are certain situations in which a taxpayer will not qualify for the credit on their 2021 income tax return. If you receive advance credits, and do not qualify for them, they must be repaid at tax filing next year. Below are a few scenarios to consider when assessing your situation.

• Your child will be over the age of 17 as of December 31, 2021. The credit is only available for dependent children 17 or under as of December 31, 2021. Remember, the advance payments are based on the prior year’s eligibility, and the IRS does not account for advancement of a child’s age.
• Your adjusted gross income has increased substantially from the prior year. There are income based phase out provisions that can reduce the credit to zero.
• You have a divorce agreement that allows for each spouse to claim the child in certain years. The credit is only available for the year in which the child is claimed.

For more considerations of why you may choose to opt out of the tax credit, click here.

Questions?

Click here for full information on the IRS website including guidance on:

• What do I need to do to receive advance Child Tax Credit payments?
• Will receiving advance Child Tax Credit payments delay my 2021 refund?
• Are advance Child Tax Credit payments taxable?