The advance monthly payments for the Child Tax Credit in 2021 are making filing taxes this 2022 tax season more complicated, so be sure to take these steps before you file—and/or get our advice quickly.
- Make sure you’re up to speed on how the Child Tax Credit has changed. For tax year 2021, the regular Child Tax Credit increased from $2,000 per qualifying child to: $3,600 for children ages 5 and under at the end of 2021; and $3,000 for children ages 6 through 17 at the end of 2021. However, these amounts will be lower if you received the advanced child tax credit last year.
- Advance payments. The advance payments of the child tax credit reflected half of a family’s estimated credit. To claim the other half, people must enter information from the IRS, mailed to them recently, on their federal tax return to reconcile the amounts.
- IRS Letter 6419. This document sent to you in the mail, IRS Letter 6419, details the total amount of advance payments paid last year and how the amount was calculated. Remember, half of that total credit amount was paid in advance monthly payments last year between July and December 2021. You’ll need to claim the other half when filing your 2021 tax return.
- Can’t find the letter? Don’t panic. Recipients can review their payments online at the IRS’s child tax credit portal before filing a return.
- Who qualifies? Custodial parents or grandparents who stayed with the the children more than 6 months; married couples with income under $150,000; single parents with income under $112,000, and everyone else with income under $75,000.
A quick refresher: Congress temporarily expanded the child tax credit for the 2021 tax year as part of its action to provide pandemic relief. It made the credit more generous—and because it wanted to get financial help to families quickly during the pandemic, it began paying half of the credit in advance, divided into monthly payments delivered from July through December.
“If you received the advance child tax credit payment last year, it is very important to not file your taxes until you can refer to Letter 6419 from the IRS stating how much you receive,” says Henry Obadiah, Founder and President of Rock and Hammer. “If you report an incorrect amount, it could delay your return.”
Like many of the provisions in the American Rescue Plan, he says, the expanded Child and Dependent Care Credit is only valid for the 2021 tax year — the year for which people are now filing their tax returns. The aid went to families with about 61 million children, according to the Treasury Department. But Congress didn’t extend the credit for this year. For 2022, the tax credit returns to its previous form.
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