Mary Beth Sallee
Jobe Publishing, Inc.
Over 36 million families across the nation will have extra money in the bank as the advance Child Tax Credit (CTC) payments begin July 15.
The advance CTC payments come as part of the American Rescue Plan (ARP) Act which has enhanced the amount of CTC up to $3,600 annually per child under age 6 and up to $3,000 annually per child age 6 to 17.
Eligible families will begin receiving half of their credit as monthly payments from July through December of 2021. Monthly payments can total up to $300 per child under age 6 and up to $250 per school-aged child. The other half of the enhanced CTC under the ARP Act will be paid in a lump sum when parents complete their 2021 tax returns next year during the 2022 tax season.
To break this down, a parent who qualifies for a $3,000 CTC will receive 6 payments of $250 each month from July through December of 2021, totaling $1,500. That parent can then claim the remaining $1,500 on their 2021 tax return next year.
Although the advance CTC payments are a much needed relief for many families, others have voiced concerns regarding how the advance CTC payments may affect 2021 tax returns.
It should be noted that the advance CTC payments are not stimulus checks. These payments are actually enhanced 2021 tax credits that the IRS are prepaying to families.
According to the Internal Revenue Service (IRS) website, if the amount of your CTC ($3,000 for example) is more than the total amount of your advance CTC payments ($1,500 total for example), a parent may claim the remaining amount of CTC (a $1,500 difference) on his/her 2021 tax return.
However, if a parent receives a total amount of advance CTC payments that is more than the total amount of CTC that he/she can properly claim on their 2021 tax year, that parent may need to repay to the IRS some or all of that excess payment.
So, how can the total amount of advance CTC payments exceed the amount of a person’s 2021 CTC? The IRS has stated that, “The amount of advance Child Tax Credit payments that you receive during 2021 is based on the IRS’s estimate of the Child Tax Credit amount that you properly would be allowed for the 2021 tax year.”
In other words, this estimate will be based upon two primary sources of information. First would be a parent’s 2020 tax year return or a 2019 tax year return if the 2020 return is unavailable. The second would be information a parent provides to the IRS in 2021, including changes in income, changes in filing status, and/or changes in the number of qualifying children.
The IRS website provides the following examples of changes that may cause advance CTC payments to be more than the total amount of CTC that can be claimed on taxes:
- Income increases in 2021.
- Filing status changes in 2021.
- Having a primary home outside of the U.S. for more than half of the 2021 year.
- A qualifying child that lived with one parent may change homes during 2021 and live with a different individual for more than half of 2021.
For those that wish to unenroll in the advance CTC payments, families must opt out via the IRS’s online portal. For those who are married or file jointly, both spouses must unenroll to completely cease the payment.
For the July advance CTC payment, the deadline to unenroll has already passed (June 28). Therefore, eligible families who did not unenroll by June 28 will still receive their first payment on July 15.
However, there is still time to unenroll for the August 13 payment if a family so chooses, as the deadline is August 2, 2021.
It may take up to seven calendar days to complete the unenrollment process. Unenrollment is a one-time action. Once a family unenrolls, they do not need to unenroll each month.
Again, if married and/or filing jointly, both spouses must each unenroll by the deadline for the unenrollment process to be complete and the advance CTC payments to completely cease. If one spouse unenrolls but the other does not, families will receive half of the joint payment they were to initially receive together.
For more information regarding the advance CTC payments, visit the IRS’s website at www.irs.gov and click the “Get Answers on the Advance Child Tax Credit” link.
To check eligibility for the advance CTC payments, visit www.irs.gov/credits-deductions/advance-child-tax-credit-eligibility-assistant.
To unenroll from the advanced payments, visit the portal link at www.irs.gov/credits-deductions/child-tax-credit-update-portal.