The American Rescue Plan Act passed on March 11, 2021, expanded the child tax credit (CTC) for the 2021 tax year for certain families. Taxpayers, if certain criteria were met, were able to receive advance monthly payments of the CTC from July 1 through December 31, 2021.
Taxpayers could have received up to half of the CTC they could be eligible for in 2021. The 2021 total credit can be up to $3,000 per qualifying child ($3,600 per child under 6). The advance child tax credit payments received by the taxpayer will need to be reconciled on the 2021 tax return to help determine if any additional CTC can be claimed, or if any Advance Child Tax Credit (ACTC) received needs to be repaid.
What do taxpayers need to do?
To assist taxpayers with the reconciliation process, the Internal Revenue Service will be issuing information letters to recipients of the ACTC. Letter 6419 (2021 Advance CTC) will include the total amount of ACTC payments received in 2021 as well as the number of qualifying children used to calculate the advance payments. Taxpayers need to be on the lookout for these letters being sent out in January 2022 and keep them with all other 2021 tax filing documents. The letters will be a helpful resource for taxpayers to properly file their 2021 tax returns.
You can also review ACTC payments received online at the IRS’s Child Tax Credit Update Portal. Taxpayers will need to create an ID.me account to utilize this online resource and will need to verify their identity by providing a photo ID such as a driver’s license, state ID, or passport. In addition, taxpayers will need to take a selfie with either a smartphone or computer webcam for verification.
Please don’t hesitate to reach out to your tax professional with any questions regarding the 2021 Child Tax Credit or the ID.me account setup process.
This article was written by Rob Holden, CPA in our Bozeman office.