Some families may have to return part of this year's monthly child tax credit payments to the IRS if they receive more than they're owed. Let’s explain.
The first payment as part of the 2021 expanded child tax credit has already gone out. If you qualify -- and you didn’t opt out by July 15 -- how will your advance monthly payments in 2021 affect next year's taxes overall?
The IRS bases your monthly payment amount on your household's 2019 or 2020 tax return. Of course, there's plenty that could change between tax seasons -- for instance, a pay increase or a dependent aging out of an eligibility bracket -- that could result
in owing money to the IRS when an adjustment is made next year. One way to prevent that from happening is to take steps this year to update your household details online at IRS.gov. With so many changes, it can get confusing fast, but the IRS
has resources to help you check your eligibility, opt out of the monthly checks and more.
The short answer is no, but there are some financial details you still need. Child tax credit checks don't count as income, so you won't have to pay income taxes on the payments.
The IRS refers to these checks as "advance" payments ahead of 2021 tax season. That means you're simply getting the payments sooner rather than waiting to receive that money when you file.
While you won't pay taxes in 2022 on the payments you receive this year, you still may need to repay the IRS some part of the "advance" payment when you file your income tax return in 2022.
Maybe. Unless you unenroll from or opt out of the monthly child tax credit payments, you'll automatically get half of your estimated amount this year from the IRS. Forgoing the monthly payments means that instead of receiving seven smaller installments
-- six in 2021 and one in 2022 -- you will simply collect one large payout when you file your taxes in 2022.
If for whatever reason you wind up getting more child tax credit money than you actually qualify for, you may need to repay some of the money to the IRS next year. That could be the case in the following scenarios:
Yes. In January 2022, the IRS will send families that received child tax credit payments a letter with the total amount of money they got in 2021. Hold on to this notice -- which the IRS is calling Letter 6419 -- you'll need information from
it when you file your 2021 tax return during next year's tax season. (This is not the same letter that the IRS is sending this year about the payments.)
To make sure the IRS has your most recent mailing address, you'll be able to update it through the Child Tax Credit Update Portal in coming months, the IRS said. You can also change your address through the Postal Service.
Yes. After you compare the information on the letter the IRS sends you in January 2022 with what you are eligible for, you may discover you are due more than you received in advance payments, based on your actual 2021 income. If that is the case, you
can claim the remaining amount of your child tax credit when you file your return.
According to the IRS, no. Because the advance child tax credit payments don't count as income, federal, state or local agencies can't use the amount when determining if you or your family is eligible for other benefits or assistance.
Please understand that WKFCU does not have the information to tell members when Expanded Child Tax Credits will arrive, if they will receive one or the amount of the payment. Please visit the IRS.Gov website for information about these payments.
Please be sure your account information is correct. Use your 4 or 5 digit number for your Savings/Share account and your 10-digit number to indicate your Checking/Share Draft account. If this information is incorrect, your payments will be returned.
(Partially reprinted from cnet.com)
View All Rates
*APR = Annual Percentage Rate
*APY = Annual Percentage Yield
Rates are subject to change without notice
Read Our Newsletter