Monthly Payments Per Child Starting in July

Hello! We hope your hot hot summer is starting off well.

We wanted to send you an update on the upcoming Advance Child Tax Credit payments you may start to receive (if you claimed a dependent under the age of 18 on your most recent tax return). If your income is eligible, the IRS will begin to send prepayments of the Expanded Child Tax Credit starting in mid-July.

How Much Should I Expect Each Month?
If your income was under the threshold ($150k Married Filing Joint or $75k Single/Married Filing Separate), you should receive:

$250 per month per child age 6-17 and/or
$300 per month per child age 0-5.

They are planning to send 6 monthly payments which would add up to either $1800 or $1500 for the year per child (and as of now, the program won't continue next year without further law changes). There is a phaseout range: you lose $50 for every $1000 earned above the $150k Married/$75k Single thresholds, so if you get a reduced amount, it is most likely due to income (and not garnishment for old tax bills, child support, etc.).

This is an Advance. Plan on your refunds at year end being smaller!
For 2021, the credit has been increased to $3000 per child age 6-17 and $3600 per child age 0-5. Previously it was $2000/child given fully on the tax return. So even though the credit is increased for the year, because of the monthly payouts, you will most likely wind up getting only $1500 or $1800 per child on your upcoming 2021 tax return rather than the $2000 you've been used to getting in past years.

Is your Joint Income Near $150,000 and you have kids?
(or $75,000 if single with dependents)

There have been a number of tax law changes for 2021 with those income thresholds. If your income is near those amounts, planning ahead now through the use of pre-tax accounts (401k, HSA, etc..) may help you not only save tax, but also dramatically increase the Child Tax Credit and Child Care Credits received this year.

CONTACT YOUR PREPARER
TO DO SOME TAX PLANNING!*

Do I Need to Do Anything?
No. If your most recent tax return (2019 or 2020) was filed with a dependent on it, you are automatically enrolled to receive the monthly advances. If you want to opt OUT of getting the monthly advances (see below for main reasons to do that), there will be a website to do that (but it doesn't exist quite yet). Check here for the (future) link to OPT OUT (once it's available).

What if I normally owe taxes every year?
If you usually owe taxes on your tax return even with claiming dependents, you can choose to opt out of the monthly advances. The increased Child Tax Credit would then be applied at year end to help decrease your year tax bill. This may be a good idea for self-employed people who struggle to pay quarterly and wind up owing at the end of each year. The IRS is still working on the online tool to allow you to opt out. Check here for the (future) link to OPT OUT (once it's available in early July).

What if my income has gone up in 2021?
The IRS will send the full Advance to anyone whose most recently filing--2020 or 2019---was below the income threshold. If your income in 2021 rises above those amounts, the advance may be more than your actual eligible Child Tax Credit. This could cause a negative surprise on your year end tax return. If your income is close to those thresholds, we would love to help you plan ahead to maximize these tax credits. Please let us know if you'd like to do some Tax Planning!

What if I haven't filed my 2020 taxes yet?
In most cases, they will send the credit based on 2019; however, if your number of dependents or income level has changed since 2019, we suggest you file your 2020 taxes as soon as you can to update your records with the IRS. Please contact us if you still need to file your 2020 tax return.

What if my bank info or address has changed?
The IRS says they are working on building a "Child Tax Credit Update Portal" that will be available soon on irs.gov where you will be able to update your contact/bank information.

FULL FAQ from IRS with many more details can be found here.

NEWSLETTER ARCHIVE

ADDITIONAL LINKS / RESOURCES

*Tax Planning Services are billed separately on an hourly basis from any annual tax preparation services provided.