If you received the child tax credit or monthly payments in 2021, you might have a lot of questions about how to claim it on your 2021 tax return.
We have some answers. Here are some commonly-asked questions you might have. If you have additional questions, give us a call. We’d be happy to help you sort through the regulations.
Q. What were the 2021 tax changes made for this credit?
A. The American Rescue Plan Act temporarily expanded the credit for 2021, including:
- 17-year-old child to qualify for the credit
- Increasing the credit to $3,000 per child, and $3,600 per child under age 6)
- The credit is fully refundable for a family who lived in the U.S. for more than six months in 2021.
- Requires half of the credit to be paid in advance by having the IRS send monthly payments from July – December 2021.
Q. What are the child tax credit eligibility requirements?
A. There are a few requirements, including:
- The child still must be a U.S. citizen, national or resident alien, and have a Social Security number.
- The child must be claimed as a dependent on your 2021 tax return, and
- The child must be related to you and generally live with you for at least six months during the year.
- You have to put the child’s name, date of birth, and SSN on the return.
Q. Can everyone claim the higher per-child tax credit on their 2021 return?
A. No. The enhanced tax break begins to phase out at modified adjusted gross income (AGI) of $75,000 on single returns, $112,500 on head-of-household returns, and $150,000 on joint returns. The credit amount is then reduced by the AGI threshold amount overage. Also, the phase-out is limited. Keep in mind, families who are ineligible for the higher tax credit may still claim the $2,000 per-child credit when they file their 2021 tax return.
Q. Can I take the higher childcare tax credit for my child that turned 17 in 2021?
A. Yes, if you meet all the other rules.
Q. We had a baby in 2021. How is the credit calculated?
A. Since the IRS didn’t know about the baby, you probably didn’t receive advanced payments. But you can account for the child on your 2021 return as long as you met the other eligibility requirements.
Q. I normally do not file a tax return because my income is below the threshold. Can I still claim the child tax credit?
A. Yes. It is fully refundable, even if you don’t have a tax liability, for families who lived within the U.S. for more than six months of the year. You don’t need to be employed or have earnings to claim the credit.
Q. I have shared custody of my 12-year-old child. My ex claims our child in even years, and I claim her in odd years. Can I claim the credit on my 2021 return if my ex claimed it on their 2020 return?
A. Yes. Since your ex claimed the child in 2020, they are likely to have received the payments in 2021. If your ex used the Child Tax Credit Update Portal to unenroll from payments, they should not have to repay any 2021 amounts on their 2021 return. Even if your ex didn’t do it, it should not impact your ability to claim the amount on your 2021 return.
Q. I don’t remember the payment amounts received in 2021 for the child tax credit. Will the IRS send me a letter telling me how much I received?
A. Yes. You should receive form letter 6419 in the mail from the IRS. It is not sent electronically. It should include the payments you received.
Q. Do I pay tax on the monthly payments received in 2021?
A. No. Payments received are advance payments for the 2021 child tax credit and are not taxable. You will use IRS Schedule 8812 to reconcile the monthly payments.
Q. I didn’t receive any advance child tax credit payments in 2021. Can I still claim the credit on my 2021 return?
A. Yes. You may claim the full amount on your 2021 return even if you did not receive payments. You must use Schedule 8812 to determine the amount. Then transfer the amount to your 1040. Remember to include the 8812 with your return.
Q. Do the child credit overpayments need to be paid back?
A. It depends. Give us a call for the details as it’s very detailed.
Q. My ex-spouse owes back taxes on child support. Will child credit tax refunds be reduced for my ex?
A. Yes. The IRS can use the refund to offset past-due federal taxes, state income taxes, and other federal or state debts, including back child support payments.
Q. Does claiming the child tax credit on my 2021 tax return increase its chance of being delayed?
A. It depends. Claiming it on your return, in and of itself, should not lead the IRS to delay your return’s processing time. However, if you report a different amount than what is on the IRS’ records or if your calculations are inaccurate, your refund could be delayed.
If you have additional questions about any of these items, give us a call. We’re happy to help you sort through how the child tax credit impacts your return.