All about the Child Tax Credit
There's a lot of information out there about changes and updates to the Child Tax Credit! Please read on for more information about how they may affect you.
Starting July 15th, 2021 (yes, tomorrow), the IRS will be sending out Advance payments on the child tax credit.
For 2021, the child tax credit amounts only increased to $3600 for children age 5 and under and $3000 for children 6-17 (this is up from $2000) – this is subject to income limits.
The IRS will start sending out half of the eligible amount each month from July through December. The other half will be claimed on the tax return filed in 2022. So if you have one child eligible for $3000, you’ll see $250/month from July through December.
Letters went out in June indicating what the IRS would start sending each month based on 2019 or 2020’s tax return. There will also be a letter sent out in January 2022 from the IRS showing the total amount of payments sent. Please keep for tax purposes!
Payments are not taxable, but if your situation changed in 2021 and you shouldn’t have received the amount you did, you may have to repay the excess. Unlike the stimulus, this is not free money!
The IRS has a portal (click on this link to access) that allows you to currently opt out from receiving the advance payments (although they will still be available on the tax return, as in the past), see a list of payments, and make changes to your bank info. In August the portal will also allow you to update your address, and, by late summer, it is expected to be able to also handle changes to dependents, marital status, and income and allow you to re-enroll, if you previously opted out.
If you have any questions, please contact us via email (cpa@sherwoodtax.com) and we will answer your question in the order it was received (usually within 72 business hours).