It can be difficult to stay up to date with tax laws, especially when it is common for them to be amended annually. At Bennett CPA, I understand the importance of continually researching and being prepared every tax season. As a licensed CPA providing individual tax services and business tax services in Colorado Springs, I am equipped with the knowledge to help you navigate tax changes and how they might impact your family and business. Starting summer 2021, there are some notable changes to the Child Tax Credit.
What Are Advance Payments?
Advance Child Tax Credit payments are early payments from the IRS totaling 50 percent of the estimated amount you can claim on your 2021 tax return. For 2021, the credit amount is $3,600 annually for children under six years old, and $3,000 for children between the ages of six and 17. A significant increase from the 2020 amount of $2,000.
Advanced payments will be paid monthly for six months through the end of the year. Eligible families will receive $300 monthly for each child under six years old, and $250 monthly for each child six years and older. If the IRS has processed your tax return from 2020 or 2019, the advanced payments may begin in July and go through December of 2021.
How To Qualify For Advance Payments
There are certain qualifications you--and your spouse, if you are filing jointly--must meet to receive advance payments:
Filed a tax return in 2019 or 2020 and claimed the Child Tax Credit on the return, or given the IRS your information in 2020 in order to receive the Economic Impact Payment using the Non-Filer tool
Have a main home in the United States for more than six months in 2021 or filed a joint return with a spouse who has a main home in the United States
Have a qualifying child who will be younger than 18 by the end of 2021 who has a valid Social Security number
Made less than certain income limits
If your family is eligible for these advance payments and your tax return has been processed, you will receive the payments automatically. However, if you have not filed your tax return for 2020 or 2019, there are certain steps you must take before receiving advance payments.
Filing A Simplified Tax Return
You can file a simplified tax return for 2020 through the IRS’ Non-Filer tool, which allows eligible individuals to register for advance payments. The Non-Filer tool also allows individuals to register for the third Economic Impact Payment and claim the 2020 Recovery Rebate Credit. Filing a simplified tax return electronically is the fastest way to get advance payments. By providing information about your financial account, you will be able to receive your payments via direct deposit.
What Are Phase-Outs?
There are, of course, income limits that determine who is eligible for advanced payments. If a person’s 2021 income is higher than the threshold, the advance payments will begin to phase out.
Limits On Who Can Qualify
Payments begin to phase out for individuals who make at least $75,000. For heads of households, payments begin to phase out once the individual makes at least $112,500. For married couples, the threshold is $150,000. Those with higher incomes, $200,000 for individuals and $400,000 for married couples, will still be able to receive $2,000.
Your Expert CPA | Bennett CPA LLC
As a licensed CPA serving the Colorado Springs community, I understand how much tax laws and tax amendments can impact families. Understanding these changes is an important part of being fully prepared for the upcoming tax season. Whether you would like to know more about how the changes to the Child Tax Credit will impact your family, or you would like to resolve another tax issue you are facing, I am here to help you. Contact me today for all of your tax needs.