Advance Child Tax Credit Began Last Week, But Questions Still Lurk
Advance Child Tax Credit Began Last Week, But Questions Still Lurk
The United States Department of the Treasury and the Internal Revenue Service have paid families the first installment of the Advance Child Tax Credit (ACTC) payments as of July 15, 2021.
The Child Tax Credit program was enacted in 1997 and provides support for families to help them afford the everyday expenses of raising children. The credit is intended to help low to middle income taxpayers and is phased out for high income families.
Typically the credit is received in one lump sum during tax season, but the recently passed American Rescue Plan provides that credit in advanced monthly payments to eligible families beginning July 15. In addition, the plan increased the credit from $2,000 per child to $3,600 for each child under age six and $3,000 for children ages six to 17.
Eligible families received a payment of up to $300 per month for each child under age six, and up to $250 per month for each child age six to 17. The six payments that will be sent to taxpayers are the equivalent of half of the Child Tax Credit. The remaining credit will be received when the individual files his or her tax return.
To be eligible to receive the advance on the credit, a person needs to have filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return. If no return was filed non-filer information must be provided to the IRS through the website childtaxcredit.gov. There is also a tool on the website to assist in opting out of the advance payments.
The payments are set to be paid on the 15th of each month until the end of 2021. Most payments are sent through direct deposit, and the remainder of recipients will receive a check.
Abby Tschakert, accountant of ACT Accurate Tax & Bookkeeping, said, “Taxpayers must be advised that if they receive an overpayment of the child tax credit they may be required to pay that amount back when filing their 2021 tax return. Overpayments may happen in the event that their income has increased and their credit is partially or completed phased out or when claiming a child is alternated between split households. There are a few income exceptions to the payback, but it is best to check directly with your preparer to avoid any tax season surprises.”
Those receiving the credit must have had the main home in the United States for more than half the year or have filed with a spouse whose main home is in the United States for more than half the year, meet income requirements and have a child that is under age 18 at the end of 2021 with a valid Social Security number.
-Melanie Stegner
