I hope everyone is enjoying their summer so far!
You have likely heard that the IRS is getting ready to release Advanced Child Tax Credit payments to eligible taxpayers.
Starting in July, eligible families will receive payments of $250 or $300 per child (depending on age). These payments will continue through December 2021.
This may be a welcome influx of cash for you at a time when it is much needed. We want to provide clarification on how this works so there are no surprises at tax time:
This is an "Advanced Payment" which is different than the COVID stimulus payments you may have received in the past year. "Advance" means that it will reduce your refund or could possibly increase your tax due when we do your final return for 2021. It is simply putting money in your pocket now vs at tax time.
Also, just because you are eligible for this based on your most recently filed return (2019 or 2020), it does not mean that you will be eligible when we file your 2021 tax return. There are variations such as level of income, age of children and most commonly, changes in who is able to claim children in divorced or separated situations, etc. If you are uncertain of your eligibility or would prefer to receive it at tax time instead then it may be prudent to unenroll from the advance payment.
You can unenroll by using the IRS link: IRS Advanced Child Tax Credit Update (note if married - both spouses will need to unenroll).
Please keep in mind - if you get advances and end up not eligible - it will be accounted for on your final return. Penalties and interest charges could apply if you end up owing taxes as a result.
You can review more information here: IRS Advanced Child Tax Credit General Information
As always, please do not hesitate to reach out to us if you need help evaluating how this applies to you.
Take Care!