Advance Child Tax Credit Payments Starting NOW!
What’s happening now
IRS web-sites.
The IRS is establishing two web sites. One to help ensure you will get your
Child Tax Credit if you are a non-filer and a second one to opt out of the
monthly payments. Both can be accessed from the following IRS webpage;
The monthly payments
are automatic. Beginning Mid-July
you will begin receiving payments for ½ of your projected 2021 Child Tax Credit
if:
·
You filed a 2019 or 2020 tax return and claimed
the credit. OR
·
You gave information in 2020 to receive the
Economic Impact Payment using the IRS non-filer tool. AND
·
The IRS thinks you are eligible. AND
·
You did not opt-out of the early payments.
The Opt-out option
Not everyone should look forward to receiving payments each
month for ½ of their Child Tax Credit. Here’s why;
You do not qualify
for the credit. The IRS is using
past tax returns to estimate who should get advance payments of this credit.
They are going to often be wrong. If your 2021 income is too high, you may need
to pay back the advance payments when you file your tax return.
You need the large
credit. If you use this credit to
balance out your year-end tax bill, you may find yourself owing money at the
end of the year. If the early payments are gone, this could create a tax bill
hardship. For example:
With two kids you
might be eligible for a $6,000 credit, with $3,000 paid to you in advance. When
you file your tax return in April 2022, your unclaimed credit on the return
will be $3,000 (you already received $3,000). Last year your tax return credit
was $4,000. If you saved some of the advance payment, you will not have a
problem. If it is spent, you now have $1,000 less of a credit to offset your
other income on the return and may have to come up with some cash to pay your
tax bill.
Your circumstances
change. If your tax life changes, advance payments of the credit will
complicate things. For example, if you are in the midst of a separation or
divorce, the advanced payments could become a big conflict.
Action to take NOW!
Look for notices. The IRS is sending out notices in the mail to
those they think should receive the Advance Child Tax Credit payments. If you
have not received one, the IRS may not think you should receive payments. So
follow-up to ensure you are on their radar by reviewing your most recent tax
returns (2019 and 2020). But don’t fret, if you are owed the credit you will
receive it when you file your tax 2021 tax return.
Opt-out. The Opt-Out portal is new and recently set up
by the IRS. So if you do not want the early Child Tax Credit payments go to
this site immediately and opt-out of the payments. No one is sure how efficient
this will be, so you need to stay on top of this. The unenrollment deadlines are as follows:
o
For the July 15, 2021 payment you need to
unenroll by June 28, 2021.
o
For the August 13, 2021 payment you need to
unenroll by August 2, 2021.
o
For the September 15, 2021 payment you need to
unenroll by August 30, 2021.
o
For the October 15, 2021 payment you need to
unenroll by October 4, 2021.
o
For the November 15, 2021 payment you need to
unenroll by November 1, 2021.
o
For the December 15, 2021 payment you need to
unenroll by November 29, 2021.
Keep track of
payments. You will need to know how
much you receive in advanced payments when you file your tax return next year.
Do not assume the IRS is going to accurately keep track of this for you.
Forecast the impact. Moving from $2,000 to as much as $3,600 per
child is a big change in most families’ tax bill. Know what the change does to
yours and look to adjust withholdings to account for this change.
It is fully
refundable. Finally, remember the
Child Tax Credit is now a fully refundable credit. So if you know of anyone that does not pay
income tax and has children, tell them. The new Child Tax Credit may be helpful
to them.