Part 1: Claiming the 2021 Advance Child Tax Credit
The IRS will begin issuing monthly payments to certain households under the Advance Child Tax Credit. The payments will begin to be disbursed on July 15, and the IRS has already begun sending letters of notice to qualifying families. Under the new 2021 Child Tax Credit, qualifying households will receive a tax credit that they will be able to claim on their 2021 tax returns. The total amount of the Child Tax Credit is $3,600 per qualifying child under age 5 and $3,000 per qualifying child over age 5. 50% of this total estimated tax credit will be disbursed monthly through the Advance Child Tax Credit beginning next month, with the remaining 50% to be claimed on 2021 tax returns.
Qualifying households will begin receiving their 2021 advance child tax credit automatically. The IRS will determine qualification based on prior tax returns. No action is needed to start receiving the advance credit unless you have not filed a 2020 or 2019 tax return, in which case you will need to file a simplified tax return online with the IRS. You must have a qualifying child that does not turn 18 before January 2022. The amount you are eligible to receive will be reduced slightly if you have a certain income level.
Part 2 of this blog post will discuss the option to opt-out of the advance payments and receive a lump sum tax credit instead. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regards to the 2021 Child Tax Credit. Please contact us at (618) 997-3436 for more information.