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IRS Updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit

The IRS has updated its frequently asked questions (FAQs) on the 2021 Child Tax Credit and Advance Child Tax Credit payments. The updated FAQs describe how taxpayers can use the Child Tax Credit Update Portal to provide the IRS with an estimate of their 2021 income.

2021 Child Tax Credit

A taxpayer may claim a tax credit under Code Section 24 (the child tax credit or CTC) for each "qualifying child" for whom the taxpayer is allowed a dependency deduction under Code Section 151.

For 2021, the credit is $3,000 ($3,600 for children under age six) per qualifying child. For 2021 only, the definition of qualifying child is expanded to include a child who has not attained age 18 before the close of 2021.

The CTC is phased out for taxpayers with modified adjusted gross income (MAGI) above certain levels. For 2021, taxpayers are subject to two different sets of phaseout rules, a phaseout of the increased CTC amount (i.e., $1,000 or $1,600), which begins at lower MAGI thresholds, and then the usual phaseout rules for the $2,000 credit amount.

Advance Child Tax Credit

Under Code Section 7527A, the IRS will make monthly advance payments in July-December 2021 equal to 50% of eligible taxpayers' 2021 CTCs (ACTC payments). Eligibility for ACTC payments will be determined based on taxpayers' 2020 returns or, if they are not yet filed, their 2019 returns.

A taxpayer's CTC for 2021 must be reduced by the aggregate ACTC payments the taxpayer received during 2021. Taxpayers who receive ACTC payments that exceed the taxpayer's allowable CTC for 2021 must, generally, repay the excess by increasing the tax liability reported on their 2021 returns.

Updated FAQs

The IRS has updated the CTC and ACTC FAQs on its website by adding new questions and answers in Topic A (question 17) and Topic F (questions 2-6). The updated FAQs have been compiled, with the older FAQs, into Fact Sheet 2021-13.

Note. These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Since they have not been published in the Internal Revenue Bulletin, generally neither the IRS nor taxpayers may rely on them. More information about what IRS guidance may be relied upon is available here.

The updated FAQs describe how taxpayers can use the Child Tax Credit Update Portal to provide the IRS with an estimate of their 2021 income.

According to the updated FAQs, taxpayers who received ACTC payments should consider providing the IRS with an estimate of their 2021 income if:

  • They think they will not qualify for the CTC because their MAGI in 2021 will exceed the threshold, or
  • They think they will not qualify for the CTC because their MAGI in 2020 exceeded the threshold for qualifying for the CTC.

The thresholds are $75,000 (single and married filing separately); $112,500 (heads of households) and $150,000 (married filing jointly).

The IRS will adjust a taxpayer’s final ACTC payment only if the taxpayer provides income information that supports an adjustment.

Additional Information Available

The IRS has also created a special Advance Child Tax Credit Payments in 2021 webpage. This webpage provides general information on who qualifies for the ACTC with links to the Child Tax Credit Update, Non-Filer information and CTC Eligibility Assistant portals.

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