What you need to know:
It seems to me that our politicians are finding ways to dole out money to the public in search of support. I don’t mean to criticize; I just question the long-term effects… For instance, many taxpayers are now getting monthly payments from the IRS that are actually down payments against their refund for the 2021 tax year. Some do not actually qualify for these payments, and they will have to pay them back.
With this is mind, here is what I think you need to know:
The IRS has increased the amount of the child tax credit. For tax year 2021:
This credit applies to anyone having children UNDER the age of 18.
The credit is $3,600 for each child 5 years old and younger.
The credit is $3,000 for each child aged 6 to 17.
2. The IRS will be advancing $125 per qualifying child per month beginning July 15, 2021.
3. THIS IS AN ADVANCE, NOT AN ADDITIONAL TAX REFUND. Your tax refund will be reduced by the amount you are advanced during 2021.
4. Unlike the stimulus payments, if you find that you did not qualify when you file your 2021 tax return, you will have to pay the money back! It will not be forgiven, even though it was the IRS’ error!
5. You have the option of “electing out” of the advance payments. This is a process – see the link below to a helpful article.
6. If you already have the check in hand or have received the direct deposit, you can not “refuse it.” There is a way to pay it back, but you will need to contact us to help you.
Disclaimer: There is always “fine print” when it comes to tax laws. The above is accurate, but there are lots of details that I did not include simply because they would bore you and apply to a very small percentage of you.
If you wonder what you should do, this is a very helpful article:
IMPORTANT: If you decide to opt out of the advance payments, you must first have an IRS online account. If you go to the link to opt out of the payments, the IRS will send you to “ID.me” to set up and account and it is very difficult. A much better option is to setup an account with the IRS first by following this link:
After you have the online account set up, you can go to Child Tax Credit Update Portal | Internal Revenue Service (irs.gov) and opt out of the advance payments.
Note: In the future you will find this online account useful when looking up tax payments and records.
Note: Please keep a record of any and all child tax credit payments you receive in order for us to prepare an accurate tax return for you. The payments received will need to be reconciled against what is still owed you at year end.
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