Child Tax Credit Reminders

By Michael Mazza, CPA, MST, Shareholder

As we begin a new year and a new tax filing season, we wanted to remind everyone of updates that were made to the child tax credit in 2021.

During 2021 the child tax credit was revised; the credit was increased to $3,600 for children under 6 years old and $3,000 for children between 6 and 17 years old.  This credit was increased from $2,000 in previous years.

The credit phases out for taxpayers starting at $150,000 for married filing jointly and $112,500 for single and head of household taxpayers. The credit is fully phased out at $400,000 for married filing jointly and $200,000 for single and head of household taxpayers.

Another change to the tax credit during 2021 was the issuance of advance payments during the year in monthly installments.  If a taxpayer did not opt out via the IRS website, they would have received monthly payments in advance of this credit starting in the second half of 2021.

The IRS will be issuing letters in January 2022 to taxpayers who received these advanced payments indicating how much they received.  This amount received in advance will need to be included on your 2021 personal tax return to reconcile against the actual credit the taxpayer is entitled to.  The amount received in advance during the 2021 year will reduce the credit to be used on your tax return to lower your tax liability.

Each taxpayer who received the advance credit will receive Letter 6419 from the IRS in January 2022.  Please be sure to include this letter with your other tax filing documents that you provide to Detweiler Hershey so that we can indicate the advance correctly on your return.  If it is not properly indicated on your return it could result in a future notice from the IRS.

If you have additional questions, please contact Detweiler Hershey or review our previous post here: Child Tax Credit Advance Payment - August 9, 2021 Post

Filed in: Client News