The Advance Child Tax Credit allows those who qualify to receive advance payments of the tax credit. The IRS will pay half the total credit amount in advance monthly payments through December 2021.
Who Qualifies?
For tax year 2021, a qualifying child is an individual who does not turn 18 before January 1, 2022, and:
- is the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant such as a grandchild, niece, or nephew.
- does not provide more than one-half of his or her own support during 2021.
- lives with the taxpayer for more than one-half of tax year 2021. (Some exceptions may apply)
- is properly claimed as the taxpayer’s dependent.
- does not file a joint return with the individual’s spouse for tax year 2021 or files it only to claim a refund of withheld income tax or estimated tax paid.
- was a U.S. citizen, U.S. national, or U.S. resident alien.
What should someone who doesn’t want to receive the advance child tax credit payments do?
Some people may not want to receive these advance payments for a couple of reasons. They either prefer to claim the full credit when filing their 2021 tax return instead, or they know they will not be eligible for the credit in 2021. These people can unenroll here through the IRS website. People can unenroll at any point, but there are deadlines each month for the update to take effect.
For married people who are filing jointly and wish to unenroll, it is important that both spouses unenroll. If only one partner unenrolls, they will still receive half the normal payment. Additionally, if they are changing bank account information, both partners must properly update their information in order to receive the full payment in the new account.
Will receiving advance child tax credit payments affect other government benefits?
No. These payments are not counted as income when determining eligibility for benefits or assistance. These programs cannot count advance child tax credit payments as a resource when determining eligibility for at least 12 months after payments are received.
Are advance child tax credit payments taxable?
No. These payments are not income and will not be reported as income on a taxpayer’s 2021 tax return. Rather, they are advance payments of a person’s tax year 2021 child tax credit.
Final Facts: The total amount of advance child tax credit payments someone receives is based on the IRS’s estimate of their 2021 child tax credit. This estimate is usually calculated using information from previous tax returns. If the total is greater than the child tax credit amount, they can claim on their 2021 tax return, they may have to repay the excess amount on their 2021 tax return.
Courtesy of the Internal Revenue Service.
If you need tax preparation assistance and would like to speak to an attorney, feel free to call us at 816-524-4949 or visit our website at hoorfarlaw.com.