Monthly Child Tax Credit Advance
We recently sent out an email regarding the upcoming Child Tax Credit advance that will start next month. In prior years, the Child Tax Credit for dependents 17 years of age and younger is usually a lump sum credit against income tax captured on the individual income tax return if the income levels are under certain thresholds.
A word of CAUTION on the monthly advance of this credit… If the advance monthly payments are received, this will reduce the total withholding and payments on your 2021 income tax return. In other words, if you take the advance credit, you may be short on your tax return and owe money with the filing of your 2021 return.
Please note, this advance is NOT like the 2020 stimulus payments where an overpayment did not have to be paid back. With the child tax credit advances, if you receive too much, there could be a balance due on your return when filing your 2021 tax return in April 2022.
Below is an excellent article that explains this advanced credit. Currently, the IRS will begin sending the advance payments in July 2021 if your 2020 return (2019 if you haven’t filed yet) meets the requirements. The IRS has released a tool, The Child Tax Credit Update Portal, to allow taxpayers to opt out of the monthly advances if they choose. Click here to go to the IRS portal to opt out.
If you have questions about how this may affect you for 2021, please don’t hesitate to contact your tax professional.