Child Tax Credit

Joseph’s daughter, Elizabeth, enjoying a snow day.

If you (or anybody in your life) had children who were under the age of eighteen this year, you may have received a monthly payment, per kid, from July through December in 2021. The American Rescue Plan Act, passed March 11, 2021, expanded the child tax credit (CTC) for the 2021 and resulted in monthly payments and larger tax returns for many young families.

The only requirement for these payments was income: $75,000 or less for individuals, head of household filers under $112,500, and joint filers who made $150,000 or less. If you were under these thresholds, you should have been getting payment from July-December of 2021. The monthly payments are called advanced child tax credit payments. If you should have gotten the payments and did not, do not worry; all is not lost. (By the way, if a child was born at any point in 2021, you still get full credit for that child no matter when they were born.)

The amount of the advanced payments families received should have equaled half of the family CTC amount for the year divided into six equal payments. The 2021 total credit is $3,000 per qualifying child or $3,600 for each child under six. If the monthly amount you received was wrong, no worries as the difference between the advance child tax credit payments (those monthly payments) you received will be reconciled on your 2021 tax return. For most families that means a new credit of $1,500 to $1,800 (if the child is under six) on your tax return.

What do you need to do:

Samara’s kids, Ayana and Faizan enjoying a snow day.

The IRS is sending all recipients of advanced payments a letter in the next few weeks. The letter is labeled “Letter 6419 (2021 Advance CTC)” and it will contain the dollar amount of advanced payments your family received. This letter will function basically like a W2. You will provide the letter to your tax preparer, CPA, or self-prep software (HR Block and Turbo Tax) and they will calculate the amount still due to you as a credit.

What if you should have gotten a credit but did not? Still no worries. There is a spot on the tax return to report the missing payments. This is also where you would report the birth of a new child.

Please make sure to watch for this letter and let your tax preparer know if you feel you should have received payments but did not.

Lastly, watch out, payments were deposited into accounts based on 2020 income reported on tax returns. If your income went up in 2021 so that you no longer qualified for the credit but received the payment, you might have a bill coming.

As always, let our office know if we can answer any questions about this or any other tax issue.