Tax Year 2021 will likely bring some surprises, but some of its changes are already
planned. Here's what you need to know about child tax credit. Some clients might have
qualified for the child tax credit and are receiving advanced payments or you might
need information on how to opt out of this option. The advanced credit might impact your 2021 tax return (Amato, 2021). See some of the recent information published by the IRS (2021) on child tax credit and advance child tax credit payments. Q A1. What are advance Child Tax Credit payments? (added June 14, 2021) A1. Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS has processed your 2020 tax return or 2019 tax return, these monthly payments will be made starting in July and through December 2021, based on the information contained in that return.
Note: Advance Child Tax Credit payment amounts are not based on the Credit for Other Dependents, which is not refundable. For more information about the Credit for Other Dependents, see IRS Publication 972, Child Tax Credit and Credit for Other Dependents PDF. For more information about how your advance Child Tax Credit payments are calculated, see Topic D: Calculation of Advance Child Tax Credit Payments. Q A2. What do I need to do to receive advance Child Tax Credit payments? (updated July 1, 2021) A2. Generally, nothing. If you are eligible to receive advance Child Tax Credit payments based on your 2020 tax return or 2019 tax return (including information you entered into the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020), you generally will receive those payments automatically without needing to take any additional action.
You must take action if you have not filed your 2020 tax return or 2019 tax return. The IRS has unveiled an online Non-Filer tool that will allow individuals who weren’t required to file (and have not filed) a tax return for 2020 to file a simplified tax return. This simplified tax return will allow eligible individuals to register for advance Child Tax Credit payments and the third Economic Impact Payment, as well as claim the 2020 Recovery Rebate Credit. Taxpayers also can visit IRS.gov/filing for details about:
IRS Free File Free File Fillable Forms Child Tax Credit Non-filer Sign-up Tool, or
Finding a trusted tax professional
The fastest way to get advance payments is to file your tax return electronically and provide information about your financial account so that you can receive your payments by direct deposit
You can use a bank account, prepaid debit card, or mobile app for your direct deposit and will need to provide routing and account numbers. If you would like to have your payment direct deposited, many financial institutions will help you open a low-cost or no-cost bank account. Visit the Federal Deposit Insurance Corporation website for details on opening an account online or use the FDIC's BankFind tool to locate an FDIC-insured bank. BankOn, American Bankers Association, Independent Community Bankers of America, National Credit Union Administration have lists of banks and credit unions that can open an account online.
For more information regarding eligibility and how advance Child Tax Credit payments are disbursed, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit and Topic E: Advance Payment Process of the Child Tax Credit. Q A3. Do I need income to receive advance Child Tax Credit payments? (added June 14, 2021) A3. No. Even if you have $0 in income, you can receive advance Child Tax Credit payments if you are eligible.
For information regarding eligibility, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit.
Q A4. Where can I get help completing my 2020 tax return if I can’t do it myself? (added June 14, 2021)
A4. If you cannot or choose not to use the Non-Filer tool, IRS Free File, or Free File Fillable Forms to file your 2020 tax return, there are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and others who can assist you in filing your return. For more information about these and other return preparers who might be right for you, visit Need someone to prepare your tax return?
Q A5. What if I do not want to receive advance Child Tax Credit payments? (updated June 24, 2021) A5. If you prefer not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you can unenroll through the Child Tax Credit Update Portal (CTC UP). CTC UP will allow you to unenroll before the first advance Child Tax Credit payment is made.
For more information regarding CTC UP, see Topic F: Updating Your Child Tax Credit Information During 2021.
Q A6. When will the IRS begin disbursing advance Child Tax Credit payments? (added June 14, 2021) A6. The IRS will begin disbursing advance Child Tax Credit payments on July 15. After that, payments will be disbursed on a monthly basis through December 2021. For more information regarding how advance Child Tax Credit payments are disbursed, see Topic E: Advance Payment Process of the Child Tax Credit. Q A7. Will the IRS contact me about advance Child Tax Credit payments before they are disbursed? (added June 14, 2021) A7. Yes. In June, the IRS will send you Letter 6417. This letter will inform you of the amount of your estimated Child Tax Credit monthly payments. This letter will also indicate where you can find additional information about advance Child Tax Credit payments. More to come on this topic next week Q A8 thru Q A18…. References Amato, N. (2021, September 30). CPA news year end tax planning grammar quiz. [Podcast]. Journal of Accountancy. Retrieved from https://www.journalofaccountancy.com/podcast/cpa-news-year-end-tax-planning-gramma r-quiz.html Internal Revenue Service (IRS). (2021). 2021 child tax credit and advance child tax credit payments, topic A – general information. Retrieved from https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-paym ents-topic-a-general-information#a16 writer.editor.GO_TO_TOP writer.editor.GO_TO_BOTTOM
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