The More You Know - Advance Child Tax Credit
Did you receive any Advance Child Tax Credit payments in 2021? This will need reconciled on your 2021 tax return. Unlike the Economic Impact Payments (Stimulus) of 2020 and 2021, these are actually ADVANCES of the child tax credit you will claim on your return. With the stimulus, if you received too much, you could keep it. With the child tax credit, if you were advanced too much, you will need to pay it back. If you didn’t receive enough, you can claim the remainder on your 2021 tax return.
While the child tax credit was increased and more is refundable, if you received all the advance child tax credit payments in 2021, the child tax credit you will receive when you file your taxes (after deducting the advance payments) may be less than you’ve claimed in the past, resulting in a smaller refund or increased balance due.
In addition, for divorced or separated parents who alternate the years they claim the children, the parent that received the advance payment may have to pay it all back.
To be sure this is reconciled correctly, you will need to know the exact amounts of the advance that you received. The IRS is supposed to be sending a Letter 6419 in December 2021 continuing into January 2022 including the total amount of advance Child Tax Credit payments received and the number of qualifying children used to calculate the payments.
If you have your taxes prepared by someone else, please give them this letter. You can also check the amount in the IRS CTC Update Portal on IRS.gov.
Currently, the advance child tax credit payments have been suspended for 2022 since congress has not been able to agree on a bill to extend these payments, nor to extend the increased child tax credit. However, the original child tax credit of $2,000 per eligible child under age 17 will still be available on the 2022 tax return you file next year.
Remember how they always talk about tax simplification? They missed the target on this one!