Reopening the U.S. is bringing more important changes as we approach post-pandemic normal. This includes an expansion of the Child Tax Credit (CTC).
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Hello again, clients and friends:
Now that the US is beginning to reopen, many of the sources of pandemic-related assistance will expire. To help with the transition to a more normal economy and to support families with children, Congress authorized expansion of the Child Tax Credit (CTC) and provided for cash payments of half of qualifying amounts.
Half now, half later
The full credit is $3,000 for each child over age 6 and under 18 years and $3,600 for each child 5 and under as of 31 December 2021, so the advance payment amount is $1,500 and/or $1,800 per qualifying child. The other half will be claimed when we file your 2021 tax return.
Amount of credit phases out
The amount of credit available phases out at different amounts, depending on your filing status. Below are the phase-out ranges:
- Single & married filing separately – full credit to $75,000, phases out at $200,000;
- Heads of households – full credit to $112.500, phases out at $200,000
- Married filing jointly – full credit to $150.500, phases out at $400,000;
Calculator for those interested – 2021 Child Tax Credit Calculator | Kiplinger
The above amounts are important because the IRS is basing your advance credits off your 2019 or 2020 filing (whichever year they have on file). If your income exceeds the limit, you may have to repay the excess amount with your 2021 tax filing. For this reason, we have had many clients unenroll from receiving these advances. Both taxpayers on a jointly filed tax return must unenroll for the changes to take effect.
Unenrollment
It’s too late to unenroll for the July payment, but you may unenroll for later payments if you choose, according to the following schedule:
August: Unenrollment deadline is 2 August 2021, payment date on 13 August 2021;
September: Unenrollment deadline is 30 August 2021, payment date on 15 Sept 2021;
October: Unenrollment deadline is 4 Oct 2021, payment date on 15 Oct 2021;
November: Unenrollment deadline is 1 Nov 2021, payment date on 15 Nov 2021; and
December: Unenrollment deadline is 29 Nov 2021, payment date on 15 Dec 2021.
IRS help
On the below referenced website, there is a link to upload your banking information if IRS doesn’t already have it as well as links to more information about who qualifies and how to test your eligibility. You can also unenroll from the program from the same website if your circumstances have changed or if you would rather have 100% of the credit on your 2021 tax return.
https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
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Please call or email if you have any questions about this or any other topic. We are here to help! Have a safe and enjoyable 4th of July!
The team at Werner & Co. CPAs
