An estimated 36 million families will see their final Advance Child Tax Credit arrive in their bank accounts today, Dec. 15. The bank deposit will be labeled CHILDCTC.
Those getting the early 2021 tax year payments by mailed paper Treasury checks should have their money soon.
Then what?
Today’s end of the pre-payments is the start of another process. When filing season starts next year, eligible families will claim the remaining Child Tax Credit (CTC) amounts for this year on their 2021 taxes.
Advance money to help COVID costs: The Child Tax Credit, or CTC, is one of the most popular tax breaks for families. Because so many suffered job cutbacks or layoffs due to the coronavirus pandemic, federal lawmakers included enhancements to the tax credit in the American Rescue Plan Act (ARPA) that became law in March.
The CTC benefits were bumped up from $2,000 per child to $3,600 for children younger than age 6, and $3,000 for children ages 6 to 17.
ARPA also instructed the Internal Revenue Service to issue half the amount to qualifying families this year, as monthly payments from July through December. That breaks out to six monthly AdvCTC amounts of $300 for families’ youngest kiddos, totaling $1,800 per child, and $250 for the older youngsters, or $1,500 per child.
Tax data changes, complications: Ideally, the estimated 36 million families who got the Advance Child Tax Credit, or AdvCTC, amounts over the last six months got the full half of the 2021 amounts they are due.
But since the IRS used prior tax filings as the basis for determining delivery of the monthly payments, the amounts might not mesh with families’ current circumstances. The children could have aged out of the larger or any payments.
Or parents could have received more money in 2021 than in 2020, meaning the payments should have been smaller. Or not sent. Full payments were designated to go to single taxpayers earning less than $95,000, and married couples filing jointly who earned less than $170,000.
Depending on family situations and changes this year, AdvCTC recipients could get the remaining credit balance in 2022. Or they could get no more CTC money when they file.
Some might even have to repay at least a portion of the CTC they got this year.
Letter to reconciling CTC claims: Taxpayers who got AdvCTC amounts will have to reconcile those payments with any more credit they are due (or owe) when they file their 2021 taxes next year.
To help them do that, the IRS will send all AdvCTC recipients a special notice, Letter 6419, in January. It will show the total amount of advance Child Tax Credit payments that were disbursed to during 2021.
Don’t worry. The amount of advance Child Tax Credit payments you got this year are not considered income. They won’t be taxes. This letter is just to help you can claim any more CTC for which you’re eligible. Or to pay back any you received in error because the IRS did not know about you family status changes.
The letter will be sent through the U.S. Postal Service. Whit it arrives in your snail mail box, put it with the rest of your tax filing documents. That way it will be handy if you need to refer to it when filing your 2021 return.
The letter will be mailed to AdvCTC recipients’ address that the IRS has on file at the time of them mailing. This generally will be the address on your most recent tax return or that recipients updated by using the IRS’ Child Tax Credit Update Portal (CTC UP).
If you plan on moving in the coming weeks, be sure to let the IRS know. Details on doing this can be found in my post titled, what else, Moving? Let the IRS know.
Filing for the rest: When the IRS starts accepting 2021 tax returns next year, which generally happens in mid- to late-January, you’ll need to file a return and claim any remaining CTC.
You’ll have to file a Form 1040, 1040-SR, or 1040-NR, and include the name and Social Security number of each dependent child for whom you are claiming the credit.
In the box where you enter this information, shown below on the 2021 tax year Form 1040, you’ll check whether the dependent qualifies for the CTC.
Then you’ll make calculations to claim the CTC, either all of it if you didn’t get any advance payments or the remainder you’re due, on Schedule 8812.
The IRS still is working on the documents. Schedule 8812 still is in a draft format, as is its instruction booklet. That’s an excerpt below of the draft 2021 tax year Schedule 8812 mentioning the Advance Child Tax Credit payments and Letter 6419.
See more on other tax forms on the Tax Forms Fiesta! page
Eventually, the updated IRS material, along with your tax preparer or tax software, will guide you through the CTC claim process.
For now, though, be on the lookout in your bank account or mail box for today’s final AdvCTC payments.
You also might find these items of interest:
- Determining child-related tax breaks when you’re divorced
- 6 Advance Child Tax Credit questions still being asked … and the answers!
- Tax credit for other dependents can help families with older kids, aging parents
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