The IRS announced yesterday that they have provided updated information on the 2021 advance payments of the Child Tax Credit (CTC), including that it has started sending letters to families whom they believe may be eligible for the payments.
Background-child tax credit. Taxpayers are allowed a CTC-temporarily expanded and made refundable for 2021 by the American Rescue Plan Act (ARP Plan or ARPA, PL 117-2, 3/11/2021)-for each qualifying child. The credit phases out for taxpayers with adjusted gross incomes (over certain thresholds).
For 2021, a qualifying child with respect to a taxpayer is defined as an under-age-18 child, whom the taxpayer may claim as a dependent (i.e., a child related to the taxpayer who, generally, lived with the taxpayer for at least six months during the year), and who is a U.S. citizen or national, or a U.S. resident.
Background-advance payments of CTC. The IRS is required to establish a program to make periodic advance payments which in total equal 50% of the IRS’s estimate of the eligible taxpayer’s 2021 CTCs, during the period July 2021 through December 2021.
In IR 2021-113, the IRS provided information about the advance payments including that they will begin on July 15, 2021. Thereafter, they will be made on the 15th of each month unless the 15th falls on a weekend or holiday.
The IRS provided updated advance payment information. They have now provided the following additional information:
- The IRS is sending letters to families who may be eligible based on information they included in either their 2019 or 2020 federal income tax return or who used the Non-Filers tool on IRS.gov last year to register for an Economic Impact Payment.
- Families who are eligible for advance CTC payments will receive a second, personalized letter listing an estimate of their monthly payment.
- The IRS will issue advance CTC payments on July 15, August 13, September 15, October 15, November 15, and December 15.
- Throughout the summer, the IRS will be adding additional tools and online resources to help with the advance CTC. For example:
- A tool that will enable families to unenroll from receiving these advance payments and instead receive the full amount of the credit when they file their 2021 return next year.
- An interactive CTC eligibility tool to help families determine whether they qualify for the advance CTC payments.
- The Child Tax Credit Update Portal, which will initially enable anyone who has been determined to be eligible for advance payments unenroll/ to opt out of the advance payment program. Later this year, individuals and families will also be able to use the portal to notify IRS of changes in their income, filing status, or number of qualifying children; update their direct deposit information; and make other changes to ensure they are receiving the right amount as quickly as possible. More details will be available soon about the online Child Tax Credit Update Portal.
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