IRS TO ISSUE LETTERS FOR ADVANCE CHILD TAX CREDIT PAYMENTS

The IRS will issue letters to taxpayers who received monthly advance child tax credit (CTC) payments in 2021, providing a record of amounts paid and qualifying children on file.

Background

Taxpayers can claim a credit against their federal income taxes for each qualifying child. Eligibility is dependent on the taxpayer’s annual income and filing status. Before 2017, the CTC was equal to $1,000 per child under 17 and was available to individuals earning up to $75,000 and married joint filers making up to $110,000. When the Tax Cuts and Jobs Act was enacted in 2017, the amount increased to $2,000 per qualifying child and the thresholds were raised to $200,000 for individual filers and $400,000 joint filers, respectively. $1,400 of the credit became refundable with the filing of the tax return by the taxpayer.

2021 Credit 

For 2021, the American Rescue Plan Act (ARPA) further increased the credit amount to $3,600 for children age 5 and under and $3,000 for children ages 6-17. Individuals making up to $75,000, heads of household making up to $112,500, and joint filers making up to $150,000 were eligible for the higher amounts under ARPA. All other recipients remained eligible for the $2,000 credit. Generally, half of the credit amount that would be claimed was automatically paid in six monthly advance installments beginning July 2021. The last advance CTC payments were distributed December 15, 2021. Taxpayers who preferred to receive the full credit all at once could opt out of receiving advance payments. The remaining half of the 2021 credit can be claimed when taxpayers complete their 2021 returns. Because the enhanced CTC was made fully refundable for 2021, all recipients, even those not required to file tax returns, should file this year. To help parents anticipate their remaining credit to be paid this year, the IRS began sending Letter 6419, 2021 advance CTC, in late December that details the amount of CTC advance payments made in 2021 and the number of qualifying children that were used to determine monthly payments. Taxpayers should retain these letters with their tax records.

2022 Credit

Effective January 1, 2022, the changes made to the CTC expired, including the increased amount and monthly payments, essentially reverting to its pre-ARPA version.

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