Pic of a the Year 1400 Family With a Baby
The IRS's 2022 tax filing season has begun. The tax agency started accepting individual tax returns for the 2021 tax year on January 24. And the filing deadline for most private returns is Apr eighteen. When you prepare your return, or alternatively, gather your records to have to your accountant or other paid return preparer, you'll desire to keep in heed the tax changes that applied for 2021…and how they should be reported on your return. One of the most significant changes for 2021 was to the child taxation credit, which is claimed by tens of millions of parents every year.
The child tax credit for the 2021 taxation year is bigger and better than ever, when compared to 2020. The credit corporeality was significantly increased, and the IRS made monthly advance payments to qualifying families from July through December 2021.
The 2021 kid tax credit changes are complicated and don't help everyone. For instance, in that location are 2 ways in which the credit can be reduced for upper-income families. That means some parents don't authorize for a larger credit and, as before, some won't receive whatsoever credit at all. More children qualify for the credit on 2021 returns. And, this year, when you file your 2021 tax return, yous'll have to reconcile the advance payments you received with the actual kid tax credit you're entitled to merits.
It'south all enough to make your head spin. But don't worry – we have answers to a lot of the questions parents are asking about the 2021 child credit, including how to report the credit and any advance payments they got on their 2021 return. Once you read through the FAQs beneath, you should feel more at ease almost the credit and filling out your Form 1040.
2020 Child Revenue enhancement Credit
Question: What were the rules for the 2020 child tax credit?
Answer: For 2020 tax returns that individuals filed terminal year, the child taxation credit was worth $two,000 per kid under the historic period of 17 claimed every bit a dependent on your return. The kid had to be related to y'all and by and large alive with you for at least six months during the year. He or she also had to be a denizen, national or resident alien of the United States and take a Social Security number. You had to put the child'southward name, date of nativity and SSN on the return, besides.
The credit began to stage out if your modified adjusted gross income (AGI) was to a higher place $400,000 on a articulation return, or over $200,000 on a single or head-of-household return. In one case you reached the $400,000 or $200,000 modified AGI threshold, the credit amount was reduced by $fifty for each $i,000 (or fraction thereof) of AGI over the applicative threshold amount. Modified AGI was the AGI shown on Line 11 of your 2020 Course 1040, plus the strange earned income exclusion, foreign housing exclusion, and amounts excluded from gross income considering they were received from sources in Puerto Rico or American Samoa.
Upwards to $ane,400 of the child credit was refundable for some lower-income individuals with children. All the same, you lot besides had to take at to the lowest degree $two,500 of earned income to get a refund.
Changes Made for 2021
Question: What changes were fabricated to the child tax credit for 2021?
Answer: The American Rescue Plan Act of 2021 temporarily expanded the kid tax credit for 2021 only. First, the law allows 17-yr-old children to qualify for the credit. Second, it increases the credit to $3,000 per child ($3,600 per child under age 6) for many families. Tertiary, it makes the credit fully refundable for families who lived in the U.Southward. for more than six months during 2021 and removes the $2,500 earnings floor. Fourth, it required half of the credit to be paid in advance by having the IRS send monthly payments to families from July 2021 to December 2021.
Note that the other general rules for child-tax-credit eligibility proceed to apply. For instance, the child still must be a U.S. denizen, national or resident alien and accept a Social Security number. You besides must claim him or her equally a dependent on your 2021 tax return, and the child must be related to you and mostly live with yous for at least 6 months during the year. And you still accept to put the child's name, date of birth and SSN on the return.
Qualifying for the Higher Credit Corporeality
Question: Can all families merits the higher per-child tax credit of $three,000 or $3,600 on 2021 returns?
Answer: No, not all families with children become the higher kid tax credit for 2021, merely most practice. The enhanced tax break begins to phase out at modified AGIs of $75,000 on single returns, $112,500 on caput-of-household returns and $150,000 on joint returns. The corporeality of the credit is reduced by $fifty for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold amount. Note that this phaseout is limited to the $one,000 or $1,600 temporary increased credit for 2021 and not to the $2,000 credit.
For example, if a married couple has one child who is iv years old, files a joint return, and has a modified AGI of $160,000 for 2021, they don't go the full $3,600 enhanced credit. Instead, since their modified AGI is $10,000 in a higher place the stage-out threshold for joint filers ($150,000), their credit is reduced past $500 ($l x x) – resulting in a concluding 2021 credit of $3,100.
And call back, many families who aren't eligible for the higher child revenue enhancement credit may still claim the $2,000 per-child credit when they file their 2021 tax return.
Additional Phase-Out
Question: If my 2021 income is higher than the thresholds for taking the $three,000 or $iii,600 per-child tax credit, tin can I still claim the $two,000-per-child credit on my 2021 return?
Answer: It depends. Families who aren't eligible for the $3,000 or $iii,600 credit in 2021, but who have modified AGIs at or beneath $400,000 on joint returns or $200,000 on other returns, tin claim on their 2021 returns the regular credit of $2,000 per kid, less the amount of any accelerate payments they get. Families with modified AGIs to a higher place the $400,000/$200,000 thresholds volition see the $2,000 per-child credit reduced by $50 for each $one,000 (or fraction thereof) of modified AGI over those thresholds.
For case, a married couple with a seven-year-old son who file a joint return and have modified AGI of $415,000 for 2021 won't get the full $3,000 enhanced credit. First, because of their high income, they don't qualify for the extra $1,000 (see question above), so their credit is reduced to the regular amount of $2,000. And then, since their modified AGI is $fifteen,000 above the second phase-out threshold for joint filers ($400,000), their credit is reduced over again by $750 ($50 x 15) – resulting in a final 2021 credit of $1,250.
Fully Refundable
Question: What does it hateful that the child tax credit is fully refundable for 2021?
Respond: For the 2021 tax yr, the expanded kid tax credit is fully refundable for families who alive in the Us for more than one half of the year. Earlier this modify, certain low-income people could merely get upwardly to $1,400 per child as a refund, instead of the total $2,000 child credit, if their child credit exceeded the taxes they otherwise owed. Under the rules for 2021, people who qualify for a child revenue enhancement credit tin receive the full credit as a refund, fifty-fifty if they have no revenue enhancement liability.
Parents don't need to be employed or otherwise take earnings to claim the child credit for 2021. Prior-year rules limited the credit to families having at least $two,500 of earned income. For 2021, families with no earned income can take the child credit if they encounter all the other rules.
Advance Payments
Question: Who got the advance payments and how much did a family go?
Answer: The advance payments generally accounted for half of a family unit's 2021 child tax credit. In 2021, the IRS sent out six monthly payments from mid-July through December to eligible families who didn't opt out of the payments. The IRS generally based eligibility for the credit and advance payments, and calculated the amount of the payment, based on your 2020 return. The IRS too set forth procedures for families who weren't otherwise required to file a tax return in 2020 to go accelerate payments.
The corporeality a family received each month varied based on the number of children in the family, the ages of the kids, the amount of the family's adjusted gross income and when they started receiving payments. For example, families who qualified for the full $three,000 ($3,600 for children under age 6) credit per child got monthly payments of $250 per kid ($300 per kid nether age 6) for six months if they started receiving payments in July. Families with higher incomes who qualified for the $2,000 credit and started receiving payments in July got monthly payments of $167 per child for six months. (Yeah, 2021 advance payments went to all families who were eligible for the child tax credit, and not just to those who qualified for the $3,000 or $3,600 per-child college credit).
To encounter how much you lot should have received each month from July to December, apply our 2021 Child Revenue enhancement Credit Computer.
17-Yr-Old Children
Question: Can I have the college child tax credit on my return for my daughter who turned 17 in 2021?
Answer: Yes. If you run into all the other rules for taking the child tax credit, you tin can claim the credit for your daughter when you file your 2021 Form 1040 this year. The age for children qualifying for the credit for 2021 is 17 and under (a change from 2020's requirement of 16 and under). Then, 17-yr-olds qualify every bit eligible children for the child credit for 2021.
New Babies in 2021
Question: What if I had a baby concluding year? How do I calculate the child tax credit on my 2021 render?
Answer: Because the IRS does not know about the baby, y'all would not accept received advance payments with respect to this kid. But you'll be able to account for your child when yous file your 2021 tax return this year. Provided yous are otherwise eligible to take the child credit, you lot can take a child tax credit of upwardly to $iii,600 for your baby on your 2021 Form 1040.
Non Required to File Tax Returns
Question: I mostly do not file tax returns because my income is below the threshold required to file. Should I file anyway for 2021 to claim the kid tax credit?
Answer: Yes. Remember that the 2021 child taxation credit is fully refundable for families who alive in the United States for more than one half of the twelvemonth. That means under the rules for the 2021 revenue enhancement year, people who qualify for the child tax credit can receive the full credit as a refund, even if they have no taxation liability.
Yous don't need to exist employed or otherwise have earnings to claim the credit on your 2021 render and get a refund sent to you. Just fill out Course 1040 and Schedule 8812, reconcile the child credit you lot're entitled to with any monthly kid credit payments you received last year, and have the excess credit refunded to you.
Families who received advance payments of the child tax credit last year must file a 2021 revenue enhancement return to compare the payments you received with the amount of the kid revenue enhancement credit you can properly merits on your 2021 return.
Shared Custody of Children
Question: My ex-husband and I share custody of our 12-year-old child. Nosotros have an agreement that my husband claims the kid tax credit in even years, and I get it in odd years. Tin can I claim the full kid tax credit on my 2021 return even if my husband received monthly payments last year?
Answer: Aye. The IRS looked at 2020 tax returns to determine who was eligible for monthly kid tax credit payments in 2021. Since your ex-husband claimed your kid for 2020 (an even year), he is the one who likely received the child tax credit payments terminal year. Your husband should have used the IRS's Child Revenue enhancement Credit Update Portal to unenroll from payments so that he won't take to repay any corporeality dorsum when he files his 2021 return. But no matter whether your ex-hubby did that does not impact your ability to claim the full amount of the kid taxation credit when yous file your 2021 tax render.
Question: My child doesn't have a social security number. Tin I claim the child credit?
Reply: No. Only children with Social Security numbers authorize for the child credit. You must put your child's name, date of nascency and Social Security number on your 2021 Form 1040.
Although children must take Social Security numbers, yous tin have either a Social Security number or an individual taxpayer identification number.
IRS Letter 6419 on Monthly Payments
Question: I don't remember the amount of advance child tax credit payments I got in 2021. Will IRS send me a letter of the alphabet letting me know how much I received?
Answer: Yes. If you lot haven't already, you should Alphabetic character 6419 in the post from the IRS. This discover volition include the total amount of accelerate kid taxation credit payments you received in 2021 and the number of qualifying children that the IRS used to calculate the advance payments. If you filed a articulation return with your spouse final twelvemonth, then both of y'all volition receive Letter 6419 listing one-half of the payments. That means joint filers will take to combine the amounts on the 2 letters when they file their return. Make certain you lot keep this letter with your tax records to assist you fill out your 2021 render. If you use a paid preparer, give the letter of the alphabet to the preparer.
The IRS warns that if the amount of accelerate child revenue enhancement payments you report on IRS Schedule 8812 don't match the figures reported on Letter 6419, then the processing of your render will be delayed. That ways whatsoever refund yous are entitled to volition also exist delayed.
If you lot don't receive Letter 6419, yous tin bank check your IRS online account on the tax bureau's website. In one case you lot take gone through all the steps to create an account (if you haven't already done so) and log on, you volition be able to verify the corporeality of child tax credit payments you lot received for 2021. Alternatively, you can call the IRS at 800-908-4184 to get the information needed before completing Schedule 8812.
Wrong IRS Letter 6419
Question: I received Letter 6419, but information technology has a different amount than what I remember actually receiving. What should I practise?
Answer: If you filed a joint return, and so you and your spouse should have each received Letter of the alphabet 6419 reporting half the payments. If this is the case for you, add together the payments together and see if the full matches what your records say you received. If information technology doesn't match, or if you're not married, cheque the figures with what's reported on your IRS online account (you'll have to set i up if y'all don't already have an business relationship). Be sure to utilize the online account figure if it's dissimilar than what's shown in Letter of the alphabet 6419. If you still have questions and believe the IRS reported the advance payments in error, yous can call the IRS at 800-908-4184.
Taxation of Accelerate Payments
Question: Do I accept to pay tax on the monthly payments I got concluding year?
Answer: No. Any payments that you received are accelerate payments of the 2021 child tax credit, so they are not taxable. On your 2021 Grade 1040, yous will apply IRS Schedule 8812 to reconcile the monthly payments that you received from the IRS in 2021 with the child taxation credit that you lot are really entitled to.
Didn't Receive Child Tax Credit Payments
Question: I didn't receive whatever advance child tax credit payments last yr. Can I claim the credit on my 2021 taxation render?
Answer: Yes. Eligible families who didn't receive any accelerate kid revenue enhancement credit payments tin claim the full amount of the child revenue enhancement credit on their 2021 federal tax render. You lot must use Schedule 8812 to effigy your total child credit and then transfer the corporeality on line 14i of the 8812 to line 28 of the Form 1040. Call up to adhere Schedule 8812 to your return.
Reconciliation of Accelerate Payments With Child Tax Credit
Question: How do I reconcile the accelerate payments I got with the bodily child revenue enhancement credit I am entitled to when I file my 2021 return?
Answer: When you make full out your 2021 Form 1040, you will compare the total amount of advance child tax credit payments that you received in 2021 with the corporeality of the actual child tax credit that you can claim on your 2021 return. Letter 6419 that you received from the IRS can help you with this adding. (Remember that if you lot're married and file a joint render, you and your spouse should have each received Letter 6419. Add the amounts shown in both Letters to come with the total amount of advance child revenue enhancement credit payments that you got in 2021.) You lot would use Schedule 8812 to figure your full child credit and to reconcile that credit with the amount of payments you received.
For most people, the corporeality of the credit should exceed the payments yous receive. If this is the case, you tin merits the excess credit on your 2021 Form 1040. After filling out Schedule 8812, y'all would transfer the amount on line 14i of the 8812 to line 28 of the Course 1040.
To illustrate, take a family of five with three children ages 12, 7 and 5. Presume the family qualifies for the higher child credit and received $800 in advance payments per month from the IRS from July through December, for a total of $iv,800. The parents will make full out Schedule 8812, calculate a total child tax credit of $9,600, reverberate the $iv,800 payments they received on line 14f, merits the boosted $4,800 on line 14i and transfer that $4,800 backlog credit to line 28 of the Course 1040 equally a refundable kid credit.
Now assume that same family unit with iii children qualifies for the $2,000 per-child credit and received $500 in advance payments per month from July through December, for a total of $3,000. The parents volition make full out Schedule 8812, calculate a total child tax credit of $6,000, reverberate the $iii,000 payments they received on line 14f, claim the additional $3,000 on line 14i and transfer that $three,000 backlog credit to line 28 of the Class 1040 as a refundable child credit.
If the credit corporeality is less than the payments you lot received, you lot may or may not have to pay the backlog back. Afterwards filling out Parts I-A and I-B of Schedule 8812, you lot'll have to complete Part 3 to figure whether you accept to pay any amount back.
Paying Back Overpayments
Question: Do overpayments of the child credit need to exist paid back?
Answer: It depends. With advance payments of the child tax credit, there will surely be instances in which families received more in accelerate kid tax credit payments from the IRS than they are otherwise entitled to. And the American Rescue Plan contemplates this by providing a "safe harbor" for lower- and moderate-income taxpayers.
Families with 2021 modified AGIs at or below $40,000 on a single render, $l,000 on a caput-of-household render and $60,000 on a joint return won't have to repay any credit overpayments that they got. On the other mitt, families with 2021 modified AGIs of at least $80,000 on a single return, $100,000 on a head-of-household return and $120,000 on a articulation return will need to repay the entire corporeality of any overpayment when they file their 2021 tax render. Families with 2021 modified AGIs betwixt the thresholds stated above need to repay only a portion of the overpayment.
You use Part Three of Schedule 8812 to figure how much, if any, of the excess payments you'll have to pay dorsum and report the amount on line xix of Schedule ii of the Form 1040 as an additional taxation.
For more details on the repayment amount, see Volition You Have to Repay Your Child Tax Credit Payments?
Starting time for Back Taxes or Child Support Arrears
Question: Will revenue enhancement refunds applicable to the child credit exist reduced for taxpayers who owe back taxes or kid back up?
Answer: Yeah. The IRS can utilize the refund to offset by due federal taxes, state income taxes and other federal or state debts. The aforementioned goes for people who are backside on child back up payments. For instance, if your actual child credit claimed on your 2021 return exceeds the monthly payments y'all received last year, the difference may be refundable but tin besides be offset by back taxes, by due kid support, etc.
Note that unlike rules practical to advance monthly payments of the child credit. The IRS wasn't allowed to take those payments to offset by-due federal taxes, state income taxes, other federal or country debts or past-due child support payments.
Refund Delays
Question: Will claiming the kid tax credit on my 2021 return cause my refund to be delayed?
Answer: It depends. We expect that, like to final year, many return filers will be waiting months for their refunds. That's because the IRS is understaffed and continues to deal with COVID issues. The agency also has millions of unprocessed 2020 returns that it nonetheless needs to work on. Claiming the higher child tax credit on your 2021 render in and of itself shouldn't lead to IRS processing delays. However, if the amount of child credit advance payments that you written report on your 1040 is different than what is in the IRS'southward records, or if your child credit reconciliation calculations are inaccurate, then the IRS warns that your refund could exist delayed.
Post-2021 Child Tax Credit
Question: What happens to the higher kid taxation credit and advance payments after 2021?
Reply: The enhanced child taxation credit was temporary…applying merely for 2021. All the 2021 enhancements to the credit expired on December 31, 2021, including the monthly payments, higher credit corporeality, letting 17-year-olds qualify and total refundability. Congressional Democrats want to come across the expansions extended, touting the impact that a higher and fully refundable kid revenue enhancement credit would have on reducing kid poverty in the U.s.a.. They have included a proposal in their Build Dorsum Better pecker to extend the higher child tax credit and advance monthly payments through 2022 and to make full refundability permanent. Yet, this bill is now stalled in the Senate, and it'due south unclear when, or even if, Democrats can revisit the bundle. Even if some form of Build Back Meliorate is eventually enacted, there is no guarantee that child tax credit expansions will be included. They are being blocked past Sen. Joe Manchin (D-Due west.Va.), who demands lower income ceilings and a work requirement for credit eligibility.
Source: https://www.kiplinger.com/taxes/602431/child-tax-credit-2021-faqs
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