Advanced Child Tax Credit: Planning for Your 2021 Tax Filing
The child tax credit has been getting a lot of attention in the press lately. An updated version of the ChildTaxCredit.gov website was released Monday with new features to assist taxpayers with obtaining the information they need to file their taxes.
The Advanced Child Tax Credit was created to provide monthly relief to help families make ends meet and more easily afford the costs of raising children. In the past, families needed to wait until filing their tax returns to receive the benefit. The monthly payments were made to qualifying taxpayers between July and December 2021 and were worth up to one-half of their estimated full annual credit.
The remaining balance of the child tax credit will be claimed on the family’s 2021 tax return. The total credit available will be compared to the amount of the advanced payments received. If the taxpayer’s 2021 situation changed and the advanced payments exceed the tax credit available, the balance will need to be paid with the 2021 tax return unless the taxpayer qualifies for repayment protection.
The IRS has sent out letters to families who have received advanced child tax payments as support for when they prepare their 2021 tax returns. It has been reported that some letters did not match the actual payments received, which include reasons such as a taxpayer moving, custody arrangements or direct deposit was not available.
If the amount on the letter does not match the amount of the advanced payment received or if the letter is not received, a taxpayer can access a summary of the payments at ChildTaxCredit.gov or through their online account at IRS.gov.
IRS Commissioner of the Wage and Investment Division and Chief Taxpayer Experience Officer, Ken Corbin, provided tips for taxpayers to file an accurate 2021 tax return.
- Gather all necessary records, such as W-2s, 1099s, receipts, canceled checks and other documents that support an item of income or a deduction or credit appearing on a tax return.
- Develop a system that keeps all important information together, including a software program for electronic records or a file cabinet for paper documents in labeled folders. Have all records readily at hand to prepare your taxes or submit information to a preparer.
- Compile all year-end income documents, such as Form 1099-MISC Miscellaneous Income; Form 1099-INT Interest Income; Form 1099-NEC Nonemployee Compensation; Form 1099-G Certain Government Payments, like unemployment compensation or state tax refund; and Form 1095-A Health Insurance Marketplace Statements.
- Taxpayers should wait to have all 2021 tax information before filing to avoid a processing delay that could slow down a tax refund.
We understand the pressures of tax filing season (more than you know!). Let us help ease your concern and together, we can steer a course to the most favorable outcome. Please contact your BMF Advisor if you would like to discuss your 2021 filing or want to plan for 2022 and beyond.
Jessica L. Tepus?>
Melissa G. Dunham?>
CPA, MTax, MBA
About the Authors
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