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American parents have likely received their last monthly Child Tax Credit payment.
With no deal to extend these temporary advance tax credit payments into 2022, the Dec. 15 check appears to likely be the last. But there’s still money parents can claim this tax season.
As part of the federal stimulus in response to the pandemic, the expanded child tax credit increased payments from $2,000 to up to $3,600 per eligible child, and put more money in parents’ pockets ahead of tax time. Eligible parents got half of the credit in advance payments from July to December 2021.
Under the American Rescue Plan, the credit was only expanded for a single year, and while there was support to extend it from some lawmakers, the bill stalled in Congress.
Still, if you qualified for the expanded Child Tax Credit, you can still expect some additional relief when you file taxes. Advance monthly payments only made up half of the full credit amount for 2021 — eligible families will receive the second half of the expanded Child Tax Credit after filing 2021 tax returns. But changes to your income or other eligibility factors may impact how much you can expect when you file.
What’s more, U.S. Treasury officials have already warned that the IRS could face “enormous challenges” this year, according to a Washington Post report. To avoid delays, including potential delays in processing your remaining Child Tax Credit, the IRS recommends filing early and preparing all necessary documents before tax season begins on Jan. 24.
Here’s everything you need to know about reporting your advance payments and how to claim the rest of the Child Tax Credit.
What to Know Before Tax Season
If you received advance Child Tax Credit payments, your eligibility was based on your last filed tax return — for most people, that would be your 2020 tax return — as well as eligible children and the children’s ages. If any of your qualifying details changed in 2021, it could change the amount you’re eligible for, and you’ll need to account for those changes when you file your taxes this year.
“You basically will have to do sort of a reconciliation on your tax return,” says Joanne Burke, CFP, a financial advisor at Birch Street Financial Advisors in Vienna, VA. It all depends “on your income and what you’ve received in those tax credits.”
Before tax season starts, you should receive a letter from the IRS detailing how much money you received in advance Child Tax Credit payments and the number of qualifying children the IRS counted to determine the amount you qualify for. You, or your tax preparer if you use one, can use this letter to determine how much of the Child Tax Credit you’re still owed when you file your return.
If you moved this year, remember to update your address in the Child Tax Credit Update Portal to ensure you receive your letter ahead of tax time. If you misplaced your letter, you can also find your information by logging into the portal.
What Is the Expanded Child Tax Credit?
The Child Tax Credit isn’t a new benefit; it was just temporarily expanded for 2021. Previously, the credit allowed parents to claim up to $2,000 per eligible child under age 17. For 2021 taxes, parents can claim up to $3,000 for each child between 6 and 17 and $3,600 for younger children under age 6. But these amounts begin to phase out once you reach certain income thresholds.
Single-filing parents with an adjusted gross income (AGI) over $75,000, heads of household with an AGI over $112,500, or those married filing jointly with an AGI over $150,000 will phase out in $50 increments for every $1,000 over the AGI limit.
How Much in Child Tax Credit Payments Will You Get on Your 2021 Tax Return?
If you received advance payments in 2021, those payments accounted for half the amount you were eligible for based on your last tax return. In general, the remaining Child Tax Credit amount you’ll claim when you file your 2021 taxes should be the second half.
Because the advance Child Tax Credit payments were based on your most recent tax return, you may have to reconcile the money you received and what you actually qualify for based on your actual situation in 2021. For instance, maybe your filing status or income changed in 2021, or your child stayed at another residence for over half of the year. You may also have chosen to opt out of the advance payments, meaning you’ll receive the full amount with your tax return instead.
Here are a few examples of how changes to your qualifying tax details, or choosing to opt out of advance payments could impact the remaining Child Tax Credit amount you’re owed:
- You have two qualifying children under age 6 and are eligible for the full credit. You received all of the advance Child Tax Credit payments and had no significant changes between your 2020 and 2021 return. You should receive $3,600 total, or the remaining $1,800 per child.
- You have one child over the age of 6, but opted out of advance payments. You also qualify for the full amount based on your income, and had no significant change in 2021. You’ll get the full $3,000 expanded credit when you file your return.
- You received advance Child Tax Credit payments for one child over the age of 6, based on your 2020 AGI of $75,000 as a single parent. You did not update your information in the update portal, and your actual AGI for 2021 totals $79,000. Instead of the full $3,000, your actual income qualifies you for $2,800. You already received $1,500 in advance payments, so you claim the remaining $1,300 on your 2021 tax return.
If You Exceed Expanded Child Tax Credit Income Thresholds
Even if you exceed the income thresholds to receive the full expanded credit, you may still qualify for the $2,000 credit that applied in previous years.
“It just means that their overall Child Tax Credit would be reduced very modestly,” says Ken Hoyt, CFP, founder of Hoyt Wealth Management in Westford, MA.
Your Child Tax Credit won’t be reduced below $2,000 per child until your AGI exceeds $400,000 for married couples filing jointly, or $200,000 for single and head of household filers, according to the IRS. If your AGI is above these phaseout thresholds, the amount you qualify for will be reduced by $50 for each $1,000 your income exceeds the threshold.
How to Get Child Tax Credit Repayment Relief
If you didn’t update your information with the IRS to reflect changes to your family situation and now qualify for less money than you’ve already received, you may need to repay the IRS some or all of it — unless you qualify for repayment protection.
The full repayment protection amount is $2,000, multiplied by the number of children the IRS initially took into account to determine your payment, minus the number of actual qualifying children on your 2021 tax return.
For instance, say you had two qualifying children on your 2020 tax return and received advance Child Tax Credit payments based on that, but will only actually claim one on your 2021 tax return. You can expect up to $2,000 in repayment relief to cover the one child you didn’t claim for 2021.
This repayment protection amount will be lower if your AGI exceeds certain income limits. The amount is reduced based on how much more your AGI is over the repayment income threshold. Repayment options reach $0 when your income is at or higher than the following:
- $120,000 for those married and filing jointly.
- $100,000 for heads of household.
- $80,000 for single filers or those married and filing separately.
If you don’t qualify for repayment relief, the amount you owe may be taken from your federal tax refund or added to your taxes owed to cover the balance. You may also work with the IRS to pay the balance with an installment agreement.
What About Parents Who Didn’t Receive Advance Child Tax Credit Payments?
Over the six months that advance payments were sent to eligible parents by the IRS, some missed payments due to incorrect banking information, a wrong address, or not qualifying based on their last filed tax return (even if they were actually eligible).
You can use the Child Tax Credit Update Portal to view your past payments, see if a payment was sent, and double check your personal information.
If the IRS didn’t issue a payment that you’re owed, you can reconcile the amount when you file your 2021 tax return. If the IRS did send a payment you never received, you can file Form 3911 to get the IRS’ help in tracing the payment.
What to Know About the Child Tax Credit for 2022
The expanded Child Tax Credit expired at the end of 2021, so as of now families will not receive any advance monthly Child Tax Credit payments in 2022. That means you’ll no longer get the extra cash in your account on the 15th of every month. If you used those payments for child care or other expenses, it can make sense to start planning how you’ll budget without them.
Even without an extension of the new changes in 2021, parents eligible in 2022 can still receive the original Child Tax Credit when they file in 2023.
That means for 2022, the amount of the credit will revert back to $2,000 per eligible child under age 17. But without the expanded credit, the Child Tax Credit may again not be fully refundable and require parents to meet a minimum earned income threshold to qualify.