Child Tax Credit: What You Need to Know For your 2021 Child Tax Credit
Last July, approximately 36 million of qualified families began receiving the first of six monthly payments for the Advance Child Tax Credit (CTC). As part of the President’s American Rescue Plan Act, the CTC had been raised to $3,600 per child under age 6 and $3,000 per child between 6 and 17 years of age. These advance payments helped compensate families for pandemic-related gaps in their usual income and acted as a much-needed stimulus for the economy. January 2022 marked the first month that families did not receive this stimulus payment.
The question that now needs to be asked is: How do these payments affect 2021 taxes?
What you need to know for your 2021 Child Tax Credit
While the first half of the CTC was delivered via monthly checks or direct payments from July-December 2021, the second half will be calculated and applied on your 2021 tax return. In order to claim the second half of the credit — or the full credit if you didn’t get the advance payments — you need to properly file your 2021 tax return to avoid processing and refund delays.
Whether you received the full credit for the six months, opted out at the start, or received some of the payments and then opted out, the specific amount received may increase or decrease the amount due to you as a refund — or you may find yourself owing additional taxes.
What should you do next?
Firstly, keep an eye out for any IRS letters—specifically Form 6419, 2021 CTC—and include them with your tax documents. This is important because if your family received an advance CTC in 2021, you must have an accurate record of it to properly report the total payments received. Additionally, please note that joint filers will receive two separate letters (6419), breaking the payments in half. You will need both to properly file your tax return. This is particularly important if your filing status in 2021 changed from 2020.
What if you received the advanced payments but no longer qualify for the credit?
If your circumstances are such that you no longer qualify for the CTC payments and received them, you are required repay the credit with your 2021 taxes. However, there is welcome news for families whose income falls below a specific threshold but is still higher than the income threshold for the full credit. You may qualify for a “pass” from the IRS, which could lower or eliminate your repayment requirement. More information is available on our Helpful Resources page under: Manage My Child Tax Credit Payments.
2021 was another unprecedented tax year, and the IRS is still processing millions of returns from 2020. As such, the most important advice we can offer you is to:
- file on time,
- have an accurate record of your advanced payments, and
- opt for direct deposit if you are expecting a refund.
Tax refunds can be significantly delayed if the calculation is not reconciled correctly. It’s worth the effort to file accurately and on time.
As ever, we are here to answer any questions you have and to help ensure you make the most of the CTC available to you, including:
- working with you to accurately reconcile your payments to expedite your return processing,
- helping you retrieve your records through the IRS, and
- determining if you qualify for the ‘pass’ on any overpayments.
Contact us today if you have any questions about the Advance Child Tax Credit and how it can affect your 2021 taxes.
Stay safe & healthy,
The CJBS Team