FINANCIAL

Get Ready For Another Child Tax Credit Payment Before Thanksgiving

Susan Tompor
Detroit Free Press

WWR Article Summary (tl;dr) As Susan Tompor reports, “The advance payments, which began in July, have been a mixed bag of easy money for many families and extra frustration for others. Some who qualify haven’t seen payments; others have been seeing vast differences in the amount of money they’ve received in the past few months. Some found the new tools at IRS.gov to be confusing to use.”

Detroit

It’s time to check those mailboxes and bank accounts — just in time for Black Friday shopping — for the next round of advance payments for the child tax credit.

If you haven’t already, mark Monday, Nov. 15, on the calendar as the day when families should start seeing extra cash via direct deposit or a check in the mail.

We’re looking at the second from the last monthly advance payment for the current child tax credit program.

Next month, Dec. 15 is the date to watch for the final round of payments in 2021.

Consumers need to understand that all this extra money each month won’t be there in January or later next year — unless Congress acts on an extensive package that includes extending the child tax credit for at least one year.

And you will need to take these payments into account when you file your 2021 tax return next year. In some cases, the advance payments now could lead to a lower tax refund or higher tax bill for some families who are doing better than they were in 2020.

First off, if you’ve been depending on that child tax credit cash to manage your bills, it’s time to step back and get a Plan B to figure out what expenses might be cut or how you’ll make up for $300 or $400 a month if that advance program won’t be there.

The average October payment across the country amounted to around $430.

Many families, not just low income, benefit
The expanded advance payments are helping families across a wide range of incomes. Some receive much more than average; some receive less.

Many two-paycheck families — where both parents hold down jobs — are receiving money as well as those who aren’t able to work.

Most families are automatically receiving monthly payments of up to $300 for children through age 5 or up to $250 each for older children ages 6 through 17. How much one receives depends on income and, of course, how many children are in the family and their ages.

The advance payments, which began in July, have been a mixed bag of easy money for many families and extra frustration for others.

Some who qualify haven’t seen payments; others have been seeing vast differences in the amount of money they’ve received in the past few months. Some found the new tools at IRS.gov to be confusing to use.

Some families must act by Nov. 15

Some families who have not received any advance payments in 2021 can get money but only if they act very quickly.

The deadline is Monday, Nov. 15, for low-income families who have not received any money yet to sign up for the advance child tax credit payments.

The IRS notes that people can get these benefits even if they don’t work and even if they receive no income.
Any family not already receiving the payments and not normally required to file a tax return can explore the tools, such as the non-filer tool for the credit, available at IRS.gov.

The IRS notes that the tools can help determine eligibility for the advance credit or help families in this group file a simplified tax return to sign up and also possibly receive Economic Impact Payments and the Recovery Rebate Credit.

Families who sign up by the Nov. 15 deadline, according to the IRS, will normally receive half of their total child tax credit on Dec. 15. This means a payment of up to $1,800 for each child 5 and younger, and up to $1,500 for each child ages 6 to 17.

Worrying about next year’s taxes now
For some, there could be headaches at tax time next year.

It’s possible that you could be receiving too much money now if your 2021 federal income tax return will be far different than the one you filed in 2020. The advance payments should amount to half of what someone would be qualified to receive but, remember, the advances are based on old information.

The IRS had been matching up advance payments based on 2019 or 2020 tax returns.

“There will be very important IRS notices for those who received advanced Child Tax Credit payments as well as those who received a third stimulus check at the beginning of the year,” said Mark Steber, chief tax information officer at Jackson Hewitt.

In January, the Internal Revenue Service will send families what is called an IRS Letter 6419 that will have the total amount of advance child tax credit payments that were distributed to you this year. Keep that letter with your tax records to review when you’re completing your 2021 tax return next year.

You can take some action through late November, if you’re worried about your tax situation.

The IRS said it can adjust monthly payments if you know that your income for 2021 will be significantly different from what was shown on your 2020 income tax return.

The IRS updated its frequently asked questions online in November to make clear that the IRS is not going to automatically adjust your monthly payments in anticipation of your 2021 financial situation. You’d need to go to the “Child Tax Credit Update Portal” at IRS.gov to do that.

The new feature is mainly designed to help a family who wants to raise or lower their monthly payments because their 2021 income has risen or fallen substantially compared with 2020.

But again, if you’re making those changes now, the best you can expect to change is the December payment. Changes made by Nov. 29 would be reflected in the December payment, which is scheduled for Dec. 15.

And there are some rules to pay attention to when you look at that portal. If you filed a joint return for 2020, for example, you can only update your income in the portal if you plan to file a joint return for 2021 with the same spouse.

What’s key is that you pay attention to income thresholds for this expanded credit.

Some key thresholds relating to the expanded credit are $75,000 for single taxpayers or married taxpayers filing separately; $112,500 for heads of household; and $150,000 for married taxpayers filing jointly.

Modified adjusted gross income above those figures will reduce the child tax credit by $50 for every $1,000 above the threshold and decreases advance payment amounts correspondingly.

Another phaseout would drive the child tax credit below $2,000 for each child and that’s when the modified adjusted gross income is above $400,000 for married couples and $200,000 for all others.

The full, expanded child tax credit amount is $3,000 for each qualifying child between ages 6 and 17 at the end of the 2021 tax year and $3,600 for each qualifying child 5 and younger at the end of the 2021 tax year.

Distributed by Tribune Content Agency, LLC.

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