Important updates for 2021 Child Tax Credit and Advance Child Tax Credit Payments!

On January 11, 2022, the IRS updated their frequently-asked-questions regarding Child Tax Credit and Advance Child Tax Credit payments to help eligible families who are preparing to file their 2021 tax return. There have been important changes to the Child Tax Credit that will help many families receive advance payments. 

• Half the total credit amount was paid in advance monthly payments in 2021. See the payment date schedule.
• Taxpayers claim the other half when filing the 2021 income tax return.

Advance payments were sent automatically to eligible people. Moreover, the American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only.

Below are the frequently asked questions about the Advance Child Tax Credit Payments in 2021, separated by topic:

• Topic A: General Information
• Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit
• Topic C: Calculation of the 2021 Child Tax Credit
• Topic D: Calculation of Advance Child Tax Credit Payments
• Topic E: Advance Payment Process of the Child Tax Credit
• Topic F: Updating Your Child Tax Credit Information During 2021
• Topic G: Receiving Advance Child Tax Credit Payments
• Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return
• Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments
• Topic J: Unenrolling from Advance Payments
• Topic K: Verifying Your Identity to View your Payments
• Topic L: Commonly Asked Shared-Custody Questions
• Topic M: Commonly Asked Immigration-Related Questions
• Topic N: Returning a Payment

Recipients of advance Child Tax Credit payments must compare the amount of payments received during 2021 with the amount that can be claimed on their 2021 tax return. Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount.

The IRS will send Letter 6419 in January to provide the total amount of advance Child Tax Credit payments that were received in 2021. Those receiving these letters should make sure they hold onto them to use in preparing their 2021 federal tax returns. 

Source: https://www.irs.gov/newsroom/irs-updates-faqs-for-2021-child-tax-credit-and-advance-child-tax-credit-payments

Note: This information cannot take the place of advice from a lawyer. Each case is dif erent and needs individual legal advice. You should contact the LITC or a private attorney if you need representation on a tax matter or if you have questions.

~Gabby Liu