As noted in previous articles, Congress has made substantial changes to the child tax credit (CTC) for 2021.
The CTC has been increased to as much as $3,000 per child ages 6 through 17 at the end of 2021, and
$3,600 per child ages five and under at the end of 2021.
The CTC is fully refundable for taxpayers who have their primary homes in the United States for more than half of the tax year and bona fide residents of Puerto Rico. However, it does begin to phase out for higher-income taxpayers once their modified adjusted gross income, based on their filing status, exceeds:
$75,000 for single filers and married persons filing separate returns.
$112,500 for heads of household.
$150,000 for married couples filing a joint return and qualifying widows and widowers.
New for 2021 is a provision that allows advance payments to eligible taxpayers of one-half of the estimated 2021 CTC in monthly payments (July through December). The monthly advance payments will be estimated based on a taxpayer’s 2020 tax return or their 2019 tax return if 2020 information is unavailable. All qualifying families are automatically enrolled for advanced payments. Payments will be by check or direct deposit.
The IRS, on June 15th, unveiled an online tool that allows eligible families (who don't make enough income to have an income tax return-filing obligation) to provide the IRS the basic information needed—name, address, and Social Security numbers—to figure and issue their Advance Child Tax Credit payments.
This tool will also be enhanced soon, allowing taxpayers to check their CTC eligibility. Further, they can enroll from advanced payments if they prefer not to receive the credit in advance.
The IRS is sending out letters – some 36 million – to those taxpayers they believe are eligible for the advance payments. You may have already received a letter. A follow-up letter will give more personalized information about the estimated payment amount the taxpayer will be eligible for. Be sure to save any letters you receive from the IRS!
Watch Out for Scams
The IRS also urges everyone to look out for scams related to the Advance Child Tax Credit payments and Economic Impact Payments. The only way to get these benefits is by filing a tax return with the IRS or registering online through the Non-filer Sign-up tool, exclusively on IRS.gov. Any other option is a scam.
Watch out for scams using email, phone calls, or texts related to the payments. Be cautious: The IRS never sends unsolicited electronic communications asking anyone to open attachments or visit a non-governmental website.
If you have any questions, please give this office a call.