Advance Payments of the Child Tax Credit (The payments some taxpayers have received or are eligible to receive between July and December)

You have probably been hearing about the government sending payments out to parents with children.  This is actually an advance of the Child Tax Credit that is usually claimed on your federal income tax return.  So what does this mean when you file your tax return next year?

You will need to keep track of the amounts you receive for these advance payments, because they will determine how much of the remaining credit you will be eligible for when you file your tax return.  These advance payments are only going to be sent out for half of the total available tax credit since the payments are only occurring from July-December, 2021.

These payments are based on the income you reported on your 2020 income tax return. That means one important thing to keep in mind is that if your income increases in 2021 and changes your eligibility for the tax credit, you may end up with a higher tax liability when you file your tax return.

You can go to the child tax credit update portal on the Internal Revenue Service website to see if you’re enrolled to receive payments, unenroll to stop getting advance payments, and/or provide or update your bank account information for monthly payments starting with the August payment.

The portal can be accessed here:

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

If you have any questions or concerns please let me know. I can assist you in any tax related questions or in tax projections to prepare you so you do not end up with a higher than expected tax bill when you file your taxes for 2021.