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Advance child tax credit payments FAQs

Posted on September 2, 2021

If you have uncertainties about the advance child tax credit and how it may affect your tax situation, you aren’t alone.

Here is what we at Teipen CPA Group, are telling our clients.

  • Qualifying families will receive early payments of the tax credit for the 2021 tax year.
  • The IRS will disburse these advance payments monthly through December 2021.

Here some FAQs to help you better understand these payments:

Who is a qualifying child?
For tax year 2021, a qualifying child is an individual who does not turn 18 before January 1, 2022, and meets these requirements:

  1. The individual must be the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant such as a grandchild, niece, or nephew.
  2. The individual does not provide more than one-half of his or her own support during 2021.
  3. The individual lives with the taxpayer for more than one-half of tax year 2021. That said, there are some exceptions to this requirement. (See IRS Publication 972, Child Tax Credit and Credit for Other Dependents or ask your CPA if you have questions.)
  4. The individual is properly claimed as the taxpayer’s dependent. For more information about how to do this, see Publication 501,Dependents, Standard Deduction, and Filing Information.
  5. The individual does not file a joint return with the individual’s spouse for tax year 2021 or files it only to claim a refund of withheld income tax or estimated tax paid.
  6. The individual was a U.S. citizen, U.S. national, or U.S. resident alien during 2021.

What if you don’t want to receive advance child tax credit payments?
Perhaps you do not want to receive monthly advance child tax credit payments because you would rather claim the full credit when you file your 2021 tax return. You can absolutely unenroll at any time, but IRS deadlines apply each month for the update to take effect for the next payment.

If you are married and filing jointly, both you and your spouse must unenroll using the Child Tax Credit Update Portal. If only one person unenrolls, they will still receive half the normal payment.

Will receiving advance child tax credit payments affect other government benefits?
The answer is no. Advance child tax credit payments cannot be counted as income when determining if someone is eligible for benefits or assistance, or how much they can receive, under federal and state law. These programs cannot count advance child tax credit payments as a resource when determining eligibility for at least 12 months after payments are received.

Are advance child tax credit payments taxable?
Again, no. These payments are not income and will not be reported as income on a taxpayer’s 2021 tax return. Payments are advance payments of a person’s tax year 2021 child tax credit.

However, Teipen CPA Group cautions, the total amount of advance child tax credit payments you receive is based on the IRS’s estimate of their 2021 child tax credit. So, if the total is greater than the child tax credit amount you claim on your 2021 tax return, you may have to repay the excess amount on their 2021 tax return.

Nothing is ever simple, right? That’s why we’re here. If you have a question about child tax credit payments, just give our team member a call and we’ll help you with the details.