To Our Valued Clients and Friends,
You may recently have received a letter from the IRS stating that on July 15, 2021 the IRS will begin issuing advance Child Tax Credit payments for those with qualifying dependents. As you prepare to receive these payments, it is important to understand a few issues.
WHAT ARE THE ADVANCE CHILD TAX CREDIT PAYMENTS?
Advance Child Tax Payments are early payments from the IRS for the estimated amount of the Child Tax Credit that you may claim on your 2021 individual tax return. If the IRS has processed your 2019 or 2020 tax return, these monthly payments will be made July through December 2021, based on the information reported on your most recent return.
ARE YOU ELIGIBLE FOR THE ADVANCE PAYMENTS?
Generally, you will qualify for the advance payments if you have a qualifying child and you, or your spouse, have a primary residence in the United States for more than half the year.
The Child Tax Credit begins to be reduced if your modified adjusted gross income in 2021 exceeds:
- $150,000 if married filing jointly or qualifying widow(er);
- $112,500 if filing as head of household; or
- $75,00 if you are a single filer or are married filing separately.
HOW WILL THIS IMPACT YOUR 2021 RETURN?
While these payments are great news for many taxpayers, the downside is that taxpayers who receive advance amounts, for which they are not eligible based on 2021 income, may have to repay these advances when they file their 2021 return.
While these payments are great news for many taxpayers, the downside is that taxpayers who receive advance amounts, for which they are not eligible based on 2021 income, may have to repay these advances when they file their 2021 return.
We recommend that clients unenroll from the advance payments if:
- They will not be eligible for the Child Tax Credit based on their 2021 income; or
- They have children who are no longer dependents; or
- They reduced their withholding or estimated tax payments for the amount of expected Child Tax Credit.
Clients in this situation could find themselves with a large tax bill at the end of the year if they received more in Child Tax Credit as an advance than their actual credit.
We suggest that clients who do not have a need to receive the advance payments unenroll. However, please be advised, if you “unenroll” then currently you cannot re-enroll.
WHAT DO YOU NEED TO DO?
If you are eligible to receive the advance Child Tax Credit payments, you generally will receive those payments automatically. You must only take action if you have not filed either a 2019 or 2020 tax return, or if you wish to unenroll from the payments.
ADDITIONAL QUESTIONS?
The IRS has created a portal for Child Tax Credit payments which may be accessed as follows: www.irs.gov/credits-
Unenroll From Advance Payments: Taxpayers may use the portal to “opt-out” of receiving the advance payment credit.
Advance Child Tax Credit Eligibility Assistant: Taxpayers may use the portal to answer a series of questions to see if they qualify for the credit.
Advance Child Tax Credit Eligibility Assistant: Taxpayers may use the portal to answer a series of questions to see if they qualify for the credit.
Additional information about the Child Tax Credit portal is available as follows: https://content.govdelivery.
If you have any questions or concerns, please do not hesitate to contact us.
Wishing You a Relaxing and Fun-Filled Summer,
Maeda Palius, Jason Janzen, Annika Jensen and the POJ Team