Terranova & Associates, LLC strives to keep our clients up to date.
We have received many calls and emails regarding the Federal Advanced Child Tax Credit being sent by the US Treasury for 2021 only. This is an advanced payment of fifty percent of your project 2021 Child Tax Credit (CTC) with monthly payments starting July 15, 2021. The other fifty percent of the CTC you will claim with the filing of your 2021 Individual Tax Return. To qualify for the Advanced Child Tax Credit, you must have:
· Claimed a CTC with a filed 2019 or 2020 Individual Tax Return; or
· Provided the IRS with your information to receive the 2020 Economic Impact Payment using the Non-Filers Tool: https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool; and
· Maintained a primary residence in the United States individually or with a spouse for more than six months of the year; and
· Have a qualifying child under the age of 18 at the end of 2021 and has child has a valid social security number; and
· Had earnings less than specified income limits.
If you have not applied for the Advanced Child Tax Credit the US Treasury the IRS will look at information available to automatically enroll you in the Advanced Child Tax Credit payment program. The following are helpful IRS tools:
· Check if you are eligible:
· Submit your Information if you are a non-filer:
· Manage your Payments:
The following are commonly asked questions asked and answered by the IRS:
a. Answer:
i. Advance Child Tax Credit Payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax returnduring the 2022 tax filing season. If the IRS has processed your2020 tax return or 2019 tax return, these monthly paymentswill be made starting in July and through December 2021,based onthe information contained in that return.
ii. Note: Advance Child Tax Credit payment amounts are not based on the Credit for Other Dependents,which is notrefundable. For more information about the Credit for Other Dependents, see IRS Publication 972, Child Tax Credit and Credit for Other Dependents.
iii. For more information about how your advance Child Tax Credit payments are calculated, see Topic D: Calculations of Advance Child Tax Credit Payments
2. Question – What do I need to do to receive advance Child Tax Credit payments? (Updated July 1, 2021)
a. Answer:
i. Generally, nothing. If you are eligible to receive advance Child Tax Credit payments based on your 2020 tax return or 2019 return (including information you entered into the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020) you generally will receive those payments withoutneeding to take additional action.
ii. You must take action if you have not filed your 2020 tax return or 2019 tax return. The IRS has unveiled an online Non-Filer tool that will allow individuals who weren’t required to file (and have not filed) a tax return for 2020 to file a simplified tax return. This simplified tax return will allow eligible individuals to register for advance Child Tax Credit payments and the third Economic Impact Payment, as well as claim the 2020 Recovery Rebate Credit. Taxpayers can also visit IRS.gov/filing for details about:
1. IRS FreeFile
3. Child Tax Credit Non-Filer Sign-up Tool, or finding a trusted tax professional
iii. The fastest way to get advance payments is to file your tax return electronically and provide information about your financial account so that you can receive your payments by direct deposit. You can use a bank account, prepaid debit card, or mobile app for your direct deposit and will need to provide routing and account numbers. If you would like to have your payment direct deposited, many financial institutions will help you open a low-cost or no-cost bank account. Visit the Federal Deposit Insurance Corporation website for details on opening an account online or use the FDIC’s Bank Find tool to locate a FDIC-insured bank. Bank On , American Bankers Association , Independent Community Bankers of America , National Credit Union Administration have lists of banks and credit unions that can open an account online.
iv. For more information regarding eligibility and how advance Child Tax Credit payments are disbursed, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit and Topic E: Advance Payment Process of the Child Tax Credit.
3. Question – Do I need income to receive advance Child Tax Credit payments? (added June 14, 2021)
a. Answer:
i. No. Even if you have $0 in income, you can receive advance Child Tax Credit payments if you are eligible.
ii. For information regarding eligibility, see Topic B: Eligibility for Advance Child Tax Credit Payment sand the 2021 Child Tax Credit.
4. Question – Where can I get help completing my 2020 tax return if I can’t do it myself? (added June 14, 2021)
a. Answer:
i. If you cannot or choose not to use the Non-Filer tool, IRS Free File, or Free File Fillable Forms to file your 2020 tax return, there are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and other who can assist you in filing your return. For more information about these and other return preparers who might be right for you, visit Need someone to prepare your tax return?
5. Question – What if I do not want to receive advance Child Tax Credit payments? (updated June 24, 2021)
a. Answer:
i. If you prefer not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you can unenroll through the Child Tax Credit Update Portal (CTC UP). CTC UP will allow you to unenroll before the first Advanced Child Tax Credit payment is made.
6. Question – When will the IRS begin disbursing advance Child Tax Credit payments? (added June 14, 2021)
a. Answer:
i. The IRS will begin disbursing advance Child Tax Credit payments on July 5. After that, payments will be disbursed on a monthly basis through December 2021.
ii. For more information regarding how advance Child Tax Credit payments are disbursed, see Topic E: Advance Payment Process of the Child Tax Credit.
7. Question – Will the IRS contact me about advance Child Tax Credit payments before they are disbursed? (added June 14, 2021)
a. Answer:
i. Yes, In June, the IRS will send you Letter 6417. This letter will inform you of the amount of your estimated Child Tax Credit monthly payments. This letter will also indicate where you can find additional information about advance Child Tax Credit payments.
8. Question - There are NINE additional questions and answers that you can read at the IRS Website:
What a taxpayer needs to be most cognizant of is that you are receiving the Child Tax Credit that you would normally receive with the filing of your annual Individual Tax Return in advance of filing your tax return. Assuming the same 2021 filing facts/situation that you had in 2020, if you received a minimal refund with the filing of your 2020 Individual Tax Return and receive the Advanced Child Tax Credit you may be creating a 2021 tax liability by accepting the Advanced Child Tax Credit and not utilizing the full Child Tax Credit with your 2021 Individual Tax Return.
PLEASE BE CAREFUL with accepting the 2021 Advanced Child Tax Credit!!
We are available for consultations regarding this and other tax matters if you need assistance, please contact us. We are excited to welcome the new clients that have retained our services!
This is our update as of this time and we will strive to keep you informed; please keep in mind this is a fluid topic and subject to change at any time.
This information should be used to strategically navigate through the months ahead. We are in the office and are happy to assist you.
Please feel free to share this with your relatives and friends. Remember we are here to help our clients during this difficult time.
Terranova & Associates, LLC.
Thomas D. Terranova, Jr., CPA, PFS, CITP
150A Andover Street, Ste 11C
Danvers, MA 01923
Tel: (978) 774-7700 X 104, Fax: (978) 774-7705
E-mail: tomt@terranovacpa.com
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