Understanding the 2021 Advance Child Tax Credit Payments

The 2021 Advance Child Tax Credit Payments have garnered a lot of attention (and questions) over the last several weeks. The changes made to the Sec. 24 child tax credit were made by the American Rescue Plan Act (ARPA), P.L. 117-2. Under the new legislation, the IRS must make 2021 periodic advance child tax credit payments to taxpayers up to the “annual advance amount” – which are equal payments up to $300 per month, per child under the age of 6 and $250 per month per child age 6-17.

What to Know About The 2021 Advance Child Credit Payments
At Leone, McDonnell & Roberts, we make it our mission to ensure our clients understand changing and new tax legislation to keep their tax burden as low as possible. Here are a few important facts you should know about the 2021 Advance Child Tax Credit Payments program.

  • The Advance Child Tax Credit payments are early payments from the IRS of 50% of the estimated amount of the CTC (child tax credit) that you are eligible to claim on your 2021 tax return.
  • The ARPA increased the CTC amount up to $3,000 for each qualifying child ages 6 – 17 and $3,600 for each child under the age of 6 at the end of the 2021 tax year.
  • If you have a processed 2020 or 2019 tax return, the monthly payments will start automatically in July 2021 through December 2021 if the taxpayer qualifies.
  • If you are not required to file a tax return, you will need to visit the IRS website @ IRS.gov/filing and provide some basic information to receive the advancement of the credit. The “Child Tax Credit Non-Filer Sign-Up Tool” on the IRS website is where taxpayers can provide this additional info.
  • If you prefer to opt-out of the advanced child tax credit payments and claim the full credit when you file your 2021 tax return, or know you may not be eligible, you will be able to unenroll through the Child Tax Credit Update Portal, which is now available (https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021). Note: BOTH spouses need to opt out even if MFJ by June 28 for the first payment
  • To take full advantage of the credit, your Modified Adjusted Gross Income (MAGI) must be under $75,000 for Single Filers, $112,500 for Head of Household filers, and $150,000 for Married Filing Joint.

Key Details about the Additional Child Tax Credit (ACTC)
It’s important to note that the Advanced Child Tax Credit (ACTC) is not based on the Credit for Other Dependents, which is a nonrefundable credit. Taxpayers should also understand the ACTC payments are not income and will not be reported as income on your 2021 tax return. These payments are an advance of your 2021 CTC. Should you receive them in advance, taxpayers should be aware they will not be able to utilize them to offset their tax liability on their 2021 tax return. Taxpayers should plan ahead, speak with their advisor so they do not have an unexpected tax bill come April 15.

However, if the total amount of the ACTC is greater than the amount you are allowable to claim, you may have to repay the excess amount on your 2021 tax return. For example, If you received ACTC payments for a qualifying child that was properly claimed on the 2020 tax return, but no longer qualifies in 2021, the ACTC you received will be added back to your income tax unless you qualify for repayment plan protection. The IRS will send a “6419 Letter” in January of 2022, providing the total amount of ACTC payments that were paid to you during 2021.

Opting Out / Unenrolling
There’s still time to opt out. You’ll use one of the new IRS portals to do so, too.

Payment Month Unenrollment Deadline Payment Date
July 6/28/2021 7/15/2021
August 8/2/2021 8/13/2021
September 8/30/2021 9/15/2021
October 10/4/2021 10/15/2021
November 11/1/2021 11/15/2021
December 11/29/2021 12/15/2021


IRS Correspondence
Save your paperwork! Taxpayers will receive letters related to the Child Tax Credit. In the next few weeks, letters are going to eligible families who filed either a 2019 or 2020 federal income tax return or who used the Non-Filers tool on IRS.gov to register for an Economic Impact Payment. The letters will confirm their eligibility, the amount of payments they’ll receive and that the payments begin July 15. Families who receive these letters do not need to take any further action. The personalized letters follow up on the Advance Child Tax Credit Outreach Letter, sent in early- and mid-June, to every family who appeared to qualify for the advance payments.

For More Information
Advance Child Tax Credit 2021

Contact Us Today to Learn More About ACTC Payments
Leone, McDonnell & Roberts can help you protect your best financial interests as you navigate through the ACTC payments process. Contact us today to hear more.