Jun 28 Tax Alert: Electing Out of Advance Child Tax Credit Payments in 2021
Important changes to the Child Tax Credit will help many families get advance payments of the credit starting this summer. The IRS will pay half the total credit amount in advance monthly payments beginning July 15. You will claim the other half when you file your 2021 income tax return. These changes apply to tax year 2021 only.
Taxpayers do not need to take any additional action to get advance payments. If eligible, they will be automatically enrolled.
Taxpayers should consider opting out of receiving the advance payments if the credit is needed to meet their 2021 tax liability. Not doing so may result in an underpayment of tax for the year. The IRS allows taxpayers to unenroll from any potential advance payments on their website. You can locate that here.
Taxpayers qualify for the advance Child Tax Credit payments if they:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
- Provided the IRS with information in 2020 to receive the Economic Impact Payment using the “Non-Filers: Submit your Information” tool; and
- Have a main home in the United States for more than half the year; and
- Have a qualifying child who is under the age of 18 at the end of 2021, and who has a valid Social Security number; and
- Made less than certain income limits.
Taxpayers will be required to reconcile their advance Child Tax Credit payments with the Child Tax Credit on their 2021 income return. If the amount of the Child Tax Credit calculated on the tax return exceeds the amount of the advance payments, the taxpayer can claim the remaining amount on their 2021 tax return.
If the advance Child Tax Credit payments received exceeds the amount the taxpayer can claim on their 2021 income tax return, the taxpayer will need to repay some or all of the excess payments.
Should you have any further questions with regards to the Child Tax Credit, please feel free to reach out to Sax’s Tax Department.