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Did you know?

Advanced Child Tax Credit 2021

6/22/2021

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Commonly referred to as the 4th stimulus, the American Rescue Plan created advanced payments of the child tax credit. Unlike the previous three stimulus this, "stimulus" is an advancement of a credit you already receive on your tax return. In 2020 children 0-16  years of age qualified for up to $2,000.00 in child tax credits. In the American Rescue Plan legislation, the amount changed for children 0-5 years of age to $3,600.00, and 6-17 to $3,000.00. So, what is this advance payment?  
The Internal Revenue Service (IRS) is taking half of the child tax credit (since this is starting in July), respectfully $1,800 or $1,500 depending on which age group your child falls under and dividing it into monthly payments. This is the $250 or $300 payments you have heard about on the news outlets. 

So, what does this mean for you? What do I need to consider? 
Times are interesting for a lot of families right now, do you need the monthly income? On your tax return do you normally have a refund or a balance due? Is your income $75,000 for single or $150,000 for married filing joint? Are you sharing a child with the other custodial parent? 

Why these questions are important? If you need the funds now and funds are tight, these may be a great option for you. If you are alternating years of claiming a child know you can only receive this if you are claiming that child in 2021. This is not like the previous 3 stimulus where both parents receive the funds. If you receive the funds and do not claim the child on your 2021 taxes you will be required to pay it back. 
Do you receive a refund or balance due? If you normally have a balance due this is only going to add to your balance due as you are receiving one of the credits ahead of time. By how much, depending on the age of the child either $500.00 or $200.00 per child on the return.
Is your income over the threshold? This increased payment has limitations. The income threshold is $75,000 for single and $150,000 for married filing joint. If your income is higher than this, you will still qualify for the $2,000.00 child tax credit. However, you will not be eligible for the increased child tax credit. 
Therefore, in 2020 if your income is below the threshold, but in 2021 you go over the threshold you will be required to pay the increased portion back.

Also new with the legislation is that people who normally wouldn't file a tax return are eligible for this credit. However, they are not automatically signed up like those that filed a 2020 return are. To receive these payments go to 

Non Filers
Many people have concerns with the variances that this credit submits them to. The IRS has created a portal to opt out of this prepayment. However, if you file a joint return, both people must opt out individually. To opt out of the prepayment go to the following link and create an ID.me account. We would suggest doing this from a mobile device, such as a smart phone or tablet. You will need to take pictures of your drivers license and do a live scan of your face. 
Opt Out
As with any new legislation there are questions and hesitations. Our office will continue to keep up to date on the process of this and other law changes that will affect your 2021 tax return. 
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    Premier Accounting wants to make sure you are up-to-date on the every changing effects of IRS policies.

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