Due to the fallout of the pandemic, the IRS is allowing eligible families to receive advance child tax credit payments. To support working families, the IRS has authorized the bringing forward of the 2021 child tax credit.
You get half the total credit amount paid in advance monthly payments and you’ll claim the other half when you file your 2021 income tax return.
In other words, you don’t need to wait until 2022 to claim it on your 2021 tax return.
Payments will be authorized monthly until December 2021. However, you are not required to accept these advance child tax credit payments, particularly if you would prefer to receive a lump sum in the form of a tax refund.
Here’s what you need to know about them.
Table of Contents
- 1 What do I Have to do to Get the Advance Payments?
- 2 Advance Child Tax Credit and Qualifying Child Definition
- 3 What if You Don’t Want to Receive Advance Child Tax Credit Payments?
- 4 Does the Advance Child Tax Credit Impact Other Forms of Government Welfare?
- 5 Are Advance Child Tax Credit Payments Taxable?
- 6 How to File Taxes Online in 3 Simple Steps With TurboTax
What do I Have to do to Get the Advance Payments?
You do not need to take additional action beyond filing your 2020 tax return to receive the monthly payments.
Your monthly payments should begin in July or the month after your 2020 tax return is processed, whichever is later.
Advance Child Tax Credit and Qualifying Child Definition
In 2021, a qualifying child must not turn 18 before 01/01/2022 to be eligible for these payments. The qualifying child in question must also meet the following requirements:
- The qualifying child must be either a direct blood relative, a stepchild, half-sister/brother, or a descendent, such as a nephew or grandchild.
- The qualifying child cannot provide more than 50% of their own support.
- The qualifying child must have resided with the taxpayer claiming them as a dependent for more than half of 2021. There are some exceptions to this rule.
- The qualifying child must be claimed as a dependent of the taxpayer claiming the credit.
- The qualifying child cannot have filed a joint return.
- The qualifying child must be a U.S. citizen, national, or resident alien.
What if You Don’t Want to Receive Advance Child Tax Credit Payments?
If you don’t want to receive monthly payments and would prefer to claim the full child tax credit during the 2021 tax filing season, or you’re ineligible, you can visit the Child Tax Credit Update Portal and un-enroll yourself. Deadlines do apply for each month of the payment, however.
Married taxpayers who normally file a joint return can un-enroll, but both the taxpayer and their spouse must do this. If only one un-enrolls, you’ll receive half the usual payment.
Does the Advance Child Tax Credit Impact Other Forms of Government Welfare?
No, these payments don’t count as income when it comes to applying for government benefits at the Federal, state, or local levels. They also don’t count as income for at least 12 months after receiving the payment.
Bodies responsible for analyzing applications for benefits are prohibited from taking advance child tax credit payments into account when making a decision.
Are Advance Child Tax Credit Payments Taxable?
No, because they don’t count as a form of income, therefore don’t need to be reported on your tax return. They’re advance payments for the Child Tax Credit 2021.
Take note, this advance tax credit is based on the IRS’s own estimates of what a taxpayer would receive when applying for the Child Tax Credit. These estimates are based on the tax returns of previous years, so your payments may be unexpectedly small or large if you have experienced a significant change in income over the past 18 months.
If the IRS’s estimates are greater than the value of the tax credit, the taxpayer may need to repay the excess and report it as income for 2021. Alternatively, you may qualify for repayment protection.