The IRS is adding the ability next week for parents to update their 2021 income information to ensure they receive the correct amount of the monthly advance child tax credit payments, particularly if they've received too little. The agency also said it is preparing to send letters ahead of tax filing season so people know how much they have received in payments this year.
The credit is $3,600 annually for children under age 6 and $3,000 for children ages 6 to 17. Eligible families receive $300 monthly for each child under 6 and $250 per older child unless they have opted out at any time. That means up to half the money -- $1,800 for the younger age group or $1,500 for the older ones -- can come via the monthly payments, which didn't begin until July of this year. The remaining money will come after filing taxes next spring.
The full monthly child tax credit benefit is eligible for incomes up to $75,000 for individuals, $112,500 for heads of household and $150,000 for married couples. It begins to phase out after that. Families with incomes up to $200,000 for individuals and $400,000 for married couples can still receive $2,000 per child.
Updating income for child tax credits
The IRS said a new feature will be added to its online child tax credit update portal Monday which will allow payment recipients to update their 2021 income information. Since the payments were initially based on 2020 tax filings, reporting a 2021 income decrease may allow some families who weren't eligible for the full amount to get it now.
"Once the update is made, the IRS will adjust the remaining payment amounts to ensure people receive the total advance payment for the year," the agency said on its website Friday. "The IRS will adjust the payment amount to reflect these changes and ensure people receive their total advance payment for the year of up to $1,800 for each child under age 6 and up to $1,500 for each child ages 6 through 17."
Monday at 11:59 p.m. EDT is the deadline to report these income changes, opt out of the Nov. 15 child tax credit payment, or report a change to banking or address information. Any changes made after Nov. 1 but before Nov. 29 will be applied to the Dec. 15 payment.
There is a catch. Only those people who were already eligible for at least part of the monthly child tax credit can report income changes. The IRS adds that if one spouse makes an income update, it will apply to both spouses and potentially affect both of their future monthly child tax credit payments.
If a taxpayer's income has increased to put them above those income thresholds in 2021, but they have taken the full monthly child tax credit payments based on their 2020 tax filings, they may have to pay money back to the IRS at tax time next spring.
Child tax credit letters coming next year
The IRS also said Friday it will send Letter 6419 to taxpayers in early 2022. The letter will document any advance child tax credit payments that were issued and how many children they were based on.
"This letter can help them accurately reconcile the advance CTC payments they have received and claim any remaining portion of the CTC when completing their 2021 federal income tax return next year," the IRS said.