Advance Child Tax Credit has been an interesting topic this year. To get or not to get it, that was the question. Or were you even able to opt-out? As, many people had issues with the IRS website, and just gave up. They increased the Child Tax Credit to $3.600 (ages birth – 5 years old), $3,000 (ages 6 -17) and $500 for 18 and older. Starting in July 2021 the IRS started issuing out Advance Child Tax Credits, *see chart below:
Now, the key word is Advance. If you received the monthly payments your Child Tax Credits on your tax return will be less than last year: $1,800 (ages birth – 5 years old), $1,500 (ages 6 -17) and $500 for 18 and older. If you were one of the Taxpayers, who depended on these credits to lower your tax liability, you may owe this year.
If you are not claiming the child on your tax return in 2021, but you received the Advance Child Tax Credit, you will need to repay back the full amount you received, it will show up as a tax liability on your 2021 tax return.
If you received the Advance, you might want to talk to your Tax Professional to make sure you will not owe during tax season.
If you receive the Advance and you claim the $2,000 credit on your W-4, this may mess up your Federal Tax Withholdings, as your credit is lowered to $1,500, but that was not adjusted on the W-4.
So many different scenarios, that could make your tax return go in the wrong direction with the Advance Child Tax Credit. Any time the IRS wants to give you an Advance, be very cautious, because there are too many unknowns that could make it favorable to the IRS.
If you have any questions or would like us to go over your information to make sure you are on the right track, or need to make any adjustments, please schedule an appointment at https://go.thryv.com/site/pinabiz and we would be happy to help.