You have probably heard of the Advance Child Tax Credit payments that are slated to start in mid-July, 2021. We have received several inquiries and hope to shed some light on these payments as well as the implications and benefits they could have on your family’s finances.
Most importantly, although part of the same legislation, these Advance Child Tax Credit payments are different from the 2021 Economic Impact Payments and may have tax implications. As implied by the name, this is an advance payment of the Child Tax Credit that many Americans typically receive as a credit on their annual Federal Tax Returns. These payments will allow families to receive up to $300 per qualifying child per month for the remaining six months of the year. If you receive these payments, the portion you receive will not be eligible to be used as a tax credit for your 2021 tax return.
What does this mean?
Basically, if you usually receive a large tax refund as a result of the Child Tax Credit, your refund may be much less, or you might end up owing taxes when you file your return for the tax year 2021. These changes are for the 2021 tax year only.
Please Note: We do not have visibility into the status of Advance Child Tax Credit Payments. We cannot provide information about your eligibility for an Advance Child Tax Credit Payment, the status of your payment, the method in which your payment was sent, where your payment was sent, or the amount of your payment. For your convenience, Sentinel Federal Credit Union offers free Text Banking to receive account information such as deposits made to your account. To enroll, login to your Online Banking account, select Go Mobile and choose Text Banking. You can complete the steps to enroll your mobile device and set up your account alerts.
Additional Payment Information:
- For 2021, the Child Tax Credit is $3,600 for children under age 6 and $3,000 for children between ages 6 and 17
- If you are eligible to receive the full credit amount and have not opted out, you will receive up to $300 per month for each child under age 6 (up to $1,800 total) and up to $250 for each child age 6 to 17 (up to $1,500 total)
To be Eligible to Receive Advance Payments:
- A child must not turn 18 before January 1, 2022
- Is the daughter, son, stepchild, eligible foster child, brother, sister, stepbrother, half-brother, half-sister, or descendant of any of the previously listed individuals of the taxpayer
- Does not provide more than one-half of her/his own support for 2021
- Lives with the taxpayer for more than half of 2021
- Is properly claimed as a dependent of the taxpayer
Income Limits to Qualify:
There are income limits to qualify for the Child Tax Credit and it can be reduced to $2,000 per child if your modified adjusted gross income (MAGI) exceeds the following limits.
- 150,000 if married filing jointly (or if filing as a qualifying widow or widower)
- $112,500 if filing as the head of household
- $75,000 if you are a single filer (or married and filing a separate return)
- The child tax credit is reduced by $50 for each $1,000 your MAGI exceeds these income limits
Additionally, the child tax credit will be reduced below $2,000 per child if your MAGI exceeds the following
- $400,000 if married and filing a joint return
- $200,000 for other filing statuses
- Again, the child tax credit is reduced by $50 for each $1,000 your MAGI exceeds these income limits
The IRS and Department of the Treasury have established tools to help you with questions you may have about the Advance Child Tax Credit Payments. Links to some of these tools are below.
What if you do not want to receive advance Child Tax Credit payments?
If you’d rather not receive monthly advance Child Tax Credit payments and would prefer to claim it in full when filing for your 2021 tax return, or if you know you will not be eligible when filing for your 2021 tax return, you can unenroll through the Child Tax Credit Update Portal (CTC UP). Using this tool will unenroll you before the first advance Child Tax Credit payment is made. Please note that if you file jointly with your spouse, you will both need to unenroll using the tool above.
How do you avoid scams relating to advance Child Tax Credit payments?
Like the Economic Impact Payments, scammers will view the advance Child Tax Credits as profit a opportunity. We urge our members to be vigilant when it comes to these payments. Sentinel Federal Credit Union nor the IRS will ever reach out to you directly via email, text, or social media and ask for personal information. Beware of any emails that include attachments or links with additional information about advance Child Tax Credit payments or Child Tax Credit refunds.
If you receive a suspicious IRS-related email, visit the page Report Phishing and Online Scams for additional information. Or if you receive anything that claims to be from us but appears suspicious, tell us directly.
What happens if my advance Child Tax Credits go to a closed account?
If your advance Child Tax Credits goes to a closed account, it will be rejected by Sentinel Federal Credit Union and then sent to you via paper check, similar to the economic impact payments.
If you have any additional questions or need assistance, please visit the IRS website or your tax professional. If you need assistance with your account, please reach out to Sentinel Federal Credit Union.