Everything You Need To Know About Advanced Child Tax Credit Payment Before Filing 2021 Tax Return
If you were eligible to collect advanced Child Tax Credit monthly payments in 2021, then a special letter from the IRS is on its way. The letter entails more money to be coming your way. Individuals and families who received the advance payment should now receive letter 6419 from the IRS which means you will be getting the rest of the credit on the Child Tax Credit for the year 2021 tax returns. You can file your tax return using tax filing software programs or opt for a hassle-free solution of outsourcing tax preparation to India.
What is Child Tax Credit?
Child Tax Credit is a tax benefit given to American taxpayers for every qualifying child that is dependent on them. It is designed for taxpayers to support their families and is a tax credit available in the form of monthly payments or a tax refund for families with children under the age of 17.
The Child Tax Credit is raised from $2000 to up to $3600 per child (depending on the family income) by the American Rescue Plan in 2021. From July 2021, eligible taxpayers received the Child Tax Credit in the form of an advance payment every month from the IRS.
The forthcoming IRS letters will have the details of how much of the Child Tax Credit you already received. You can then use that information to fill out Schedule 8812 (and Form 1040) to ensure you receive the rest of the credit for your 2021 tax returns. Married couples will be receiving two letters so, you will need both letters for the filing of an accurate return. If you haven’t yet received the advanced Child Tax Credit but are eligible to receive it, you can claim it by filing your 2021 tax return.
Who qualifies for advance payments?
Individuals or married couples who file jointly need to qualify the following criteria for advanced payments of the Child Tax Credit. It is important to know that advanced payments are automatically sent to eligible people.
- If you claimed the Child Tax Credit on the return when filing a 2019 or 2020 tax return.
- Gave the information to the IRS in 2020 to receive the Economic Impact Payment using the tool- Non-Filers: Enter Payment Info Here.
- Gave the information to the IRS in 2021 using the tool – Non-Filer: Submit Your Information.
- Lived for more than half the year in a main home in the United States which includes the 50 states and the District of Columbia or you lived for more than half the year with a spouse who has a main house in the US and filed jointly.
- A qualifying child with a social security number under the age of 18 at the end of 2021.
- If you have made less than certain limits set on the income.
How much is the Child Tax Credit?
The advanced Child Tax Credit is extended from 2020, making it worth $3600 for children below six and $3000 for ages between six and seventeen. Married couples who file together and make less than $150,000 and single filers who make less than $75000 are in the eligibility criteria for the full amount. The tax credit began to phase out for married couples who are making more than $150000. The tax credit began phasing out for single filers who make more than $75000.
Time to move to get your money
If you received the advanced Child Tax Credit in 2021, you can simply refer to the Child Tax Credit Update Portal on the IRS website to check how much money you have already received. You also have the option to submit your taxes as soon as January 24 and up to April 18. You probably won’t receive any refund for the Child Tax Credit until mid-February.
Apart from that, to receive your return in the fastest way, make sure you file your taxes electronically and set up a direct deposit. This way, you will receive the refund within 21 days of filing. You can take help from an outsourced tax preparation firm to accurately report the amount on the tax refund to avoid delays, as extra care needs to be taken if you received an advanced Child Tax Credit or an Economic Impact Payment last year.
If you are making under $73000, you can use the guided tax preparation of the IRS. Individuals who are making more than $73000 can use the free fillable forms, but there is no tax preparation advice or guidance associated with those. One of the easier ways to file your taxes accurately is through outsourcing tax preparation to India which is economical and also helps in complicated fillings. You can also opt for tax filing software online for simple filings, but it’s better to go for outsourced tax preparation for advanced filings.
Changes for the year 2022
The Child Tax Credit will look different this year so keep that in mind when you prepare your 2021 tax returns. Legislation for the extent of increased credit was not passed for the year 2022. This is why as of January 1, 2022, the Child Tax Credit has been reverted to the original $2000 per child, which is in the form of tax return and not in the form of monthly payments.
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To get more insights, you can visit www.capactix.com or send mail on [email protected].