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Recent Tax Updates

Advance Child Tax Credit Payment Update

The American Rescue Plan Act that was enacted in March increased the Child Tax Credit, made it fully refundable, and allowed one-half of the credit to be advanced to eligible taxpayers in monthly payments which will begin on July 15, 2021.

The IRS has begun sending out letters informing the more than 36 million American families who may be eligible for these payments. Eligibility is based on information included on the 2020 federal tax return (or their 2019 federal tax return if they had not filed their 2020 return by the time the payments begin).

Eligible families will receive these advance payments either as a direct deposit or check. The IRS will issue these advance Child Tax Credit payments on July 15, August 13, September 15, October 15, November 15 and December 15.

The amount of each payment is determined for each qualifying child as follows:

  • $300 – under age 6
  • $250 – ages 6 to 17

IRS Online Tools Related to Advance Child Tax Credit Payments Child Tax Credit Update Portal
As part of the rollout of the Advance Child Tax Credit payments, the IRS will be creating a Child Tax Credit Update Portal that will initially enable anyone who has been determined to be eligible for the payments to opt-out (unenroll) for the advance payments and receive the full amount of the credit when they file their 2021 tax return.

Later in the year, the portal will allow individuals to check on the status of their payments and make updates to their information, such as number of eligible children, filing status and income for the year. This portal will be available in the next few weeks.

Child Tax Credit Eligibility Tool
The IRS will also make available a new online interactive eligibility tool that will allow taxpayers to determine whether or not they qualify for the Advance Child Tax Credit payments.

Reconciliation of Advance Payments with 2021 Child Tax Credit
It is important to remember that if a taxpayer receives an Advance Child Tax Credit payment, they will have to reconcile the total payments received with the Child Tax Credit calculated on the 2021 federal tax return during the 2022 tax filing season. This means that unless a taxpayer chooses to opt-out, the amount of the Child Tax Credit that is calculated on their 2021 federal tax return will be reduced by the total advance payments received.

2021 Child Tax Credit Details
As a reminder, below are the changes that were made to the Child Tax Credit for Tax Year 2021:

  • Credit is $3,000 per child age 6 – 17 and $3,600 per child under age 6
  • Credit is fully refundable

The child tax credit will have two phase-outs:

1st Phase-Out – The credit begins to be reduced to $2,000 when Adjusted Gross Income (AGI) reaches the following:

  • Single filers – $75,000
  • Head of Household filers – $112,500
  • Married Filing Joint filers – $150,000

2nd Phase-Out – The remaining $2,000 credit will begin to be reduced to zero when the AGI reaches the following:

  • Married filing joint filers – $400,000
  • All other filing statuses – $200,000

For more information, see the following on the IRS website:

Mark Castro, CPA

Mark Castro, CPA

Mark has been with CrossLink Professional Tax Solutions (CPTS) since 2008, but has been in the tax industry since 1990. As the government/tax industry liaison for CPTS, Mark has been very active in working with the IRS, States, and other tax industry members to help improve communications, promote standardization, and simplification of eFile systems. Mark has also been active with industry associations as a board member of the National Association of Computerized Processors (NACTP) and the Council of Electronic Revenue Communication Advancement (CERCA) for many years. These two associations work with the IRS and States to help solve key eFile and electronic tax system issues and work to improve the operations of the State and IRS eFile systems.

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