Did you receive advanced Child Tax Credit payments in 2021? This article will answer questions you may have about filing your tax return this spring.
What is the Child Tax Credit and the advance payments?
The Child Tax Credit is a credit available to certain taxpayers who claim a minor child in the household on their tax return. This article will not address the specific requirements to claim the Child Tax Credit, but you can get more information about how to qualify for the credit at https://www.irs.gov/forms-pubs/about-publication-972.
The American Rescue Plan Act created advance payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit. These payments were scheduled to be made in the last 6 months of 2021.
What should I do if I received advance payments this fall?
If you received any advance payments of the Child Tax Credit between July and December, 2021, you should plan on filing a tax return in the spring of 2022. You will need to know the amount of payments you received.
When you file your tax return, you will need to include the amount of advance payments you received. If the total amount of your Child Tax Credit exceeds the you received in advance payments, you can claim the remaining amount of your Child Tax Credit on your 2021 tax return.
The IRS will send you a letter in January 2022, which lists the total amount of advance payments you received. This letter is called Letter 6419 and they will mail it to the address on your most recent tax return or if you updated your address in the Child Tax Credit portal. You will want to have this letter when it is time to do your taxes.
I didn’t receive any advance payments. What should I do?
You may still qualify for Child Tax Credit payment even if you didn’t get advance payments. You need to file a 2021 tax return and claim the credit. You would get the credit as part of your regular tax refund.
For 2021, there is no minimum amount of earned income required to qualify for the credit. That means you may qualify for the Child Tax Credit even if you don’t normally file a tax return or have earned income.
What if I received advance payments when I should not have?
Some taxpayers received payments in 2021 even if the child was not living with them. This commonly occurred when a taxpayer claimed a child on their 2020 tax return, but due to shared custody or other arrangements, does not plan to claim the child on their 2021 tax return. These taxpayers still need to account for the advance payments they received.
If you receive a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you can properly claim on your 2021 tax year, you may need to repay to the IRS some or all of that excess payment. This would include situations where you received payments for a particular child, but then do not claim the child on your 2021 tax return.
The American Rescue Plan Act gives some taxpayers a “safe harbor” if they received advance payments in error. The IRS will not demand repayment of any excess amount if your main home was in the US for more than half the year and your modified adjusted gross income (AGI) for 2021 is at or below the following amounts on your 2021 return:
• $60,000 if you are married and filing a joint return or as a qualifying widow/widower;
• $50,000 if you are filing as head of household;
• $40,000 if you are filing single or married filing separately.
There is limited protection for taxpayers who earned more than the above amounts. The repayment protection is reduced as your AGI increases.
I share custody with my former partner/spouse and they received the advance payments instead of me. Can I still claim the credit?
You can still claim the Child Tax Credit if you are claiming the child on your 2021 tax return, even if the other parent received payments. The IRS will review your return and determine if you qualify for the credit and whether you received any advance payments. If you qualify, you will receive the credit based on your information. The IRS may ask the other parent to pay back the advance payments they received. (See above, earlier in this article.) The amount of credit you qualify for will not be reduced by the other parent’s payments.
I need help preparing my taxes. Where can I get help?
You can get free tax return preparation through the Volunteer Income Tax Assistance (VITA) Program. You can find your local VITA site by calling 211 or going to https://irs.treasury.gov/freetaxprep/.
You can also use the IRS’s Free File program to prepare your own taxes. You can find more information on the IRS’s website, http://www.irs.gov.
If you need help after you file your tax return, Iowa Legal Aid's Low-Income Taxpayer Clinic (LITC) is a special project that can help low-income Iowans. Providing assistance to people who have tax controversies is one of services this project provides. For details, contact Iowa Legal Aid. Call 1-800-532-1275 for assistance. You can also visit the Iowa Legal Aid Website at www.iowalegalaid.org and apply on-line. As a general rule, Iowa's LITC does not prepare current year tax returns.