Advance Child Tax Credit

child tax credit

This tax season, a major change for many taxpayers will be reporting Advance Child Tax Credit payments received through the year.  The IRS expects any taxpayer who received these payments to report accurate amounts received each month – which means there will be more information to gather when you are preparing to get your tax returns filed.

About the Child Tax Credit Advance Payments

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6 Payments

From July through December of 2021, advance Child Tax Credit payments were sent by the IRS to individual taxpayers.
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Separate for Each Taxpayer

Payments were made via direct deposit to individual taxpayers, which means even if you filed Married Filing Joint in 2020, the payments came to each spouse separately. (If taxpayers shared a bank account, it would have come as separate deposits.)
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Amounts Varied

The total credit is $3,600 for each qualifying child who had not reached age 6 by the end of 2021 or $3,000 for each qualifying child age 6 -17. Taxpayers were meant to receive approximately half of their total as the advanced payment.
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They Money Isn't Taxed

The money you received is NOT included in your income, so it is not taxed. It was essentially a pre-payment, which means you might need to prepare for a smaller refund than you usually receive.
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You Might Have to Pay It Back

There are phase-out limits based on income. The advanced payments were based on 2020 income and if you earned above the thresholds in 2021, but received advanced payments, you will have to pay back the money.

There Was an Opt-Out

If you did opt out, remember that because the advance payments were sent separately to married spouses, each person had to opt-out. If only one spouse went through those steps, the other needs to report their payments.

How to Report the CTC Payments

There are a few ways to show your accountant how much money you received.   Though there are several options, our official recommendation is to set up an IRS portal.  An account with the IRS will be handy for many items including viewing Child Tax Credit amounts, Economic Impact Payments, making your tax payments, and seeing tax records.

In January 2022, the IRS began sending Letter 6419 to taxpayers that includes the total amount of advance child tax credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. If you have that letter, you should add it to your TaxCaddy or personal tax file so your accountant can review it.  If you did not receive the letter, or if you did but you can’t find it, you’ll need to do one of the next two options.

The IRS has acknowledged that some letters include an incorrect total – this specifically affects taxpayers who switched bank accounts during the year.  The bad news is that even if your letter from the IRS is incorrect, you are still responsible for reporting the right amount.  For that reason, options 2 and 3 listed here are a more secure choice for relaying your payment amounts.

The IRS has made one thing very clear: the place with the most accurate information regarding CTC Advance Payments is within the IRS Portal. This portal is extremely useful because it contains tax records along with EIP and CTC information.  Here are the steps to set up your account.

  • Enter your email and create a password.
  • A message will be sent to your email with a confirmation code.
  • After entering the code, you must add a layer of security, and it gives you 5 options to choose from. 
  • Receive a 2nd code from your chosen 2nd security layer.
  • Upload a photo of your license, state ID, passport, or passport card.
  • Take a selfie video with your phone or webcam*.
  • Enter your SSN.
  • Authenticate a few personal details such as birthdate and address.

*The IRS is supposed to be removing this step to make it easier.

Click here to set up your account.

Finally, the most tedious option would be to get your July-December bank statements.  You’ll need to highlight and label the CTC payments for your accountant.

Quick Links

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