Advanced Child Tax Credit (ACTC) is a revision of the payment timing of regular Child Tax Credit (CTC). This revision includes monthly payment allocations of half the CTC. Taxpayers will claim the 2nd half of the CTC when they file their 2021 tax return.
Taxpayers do not have to enroll to receive this payment. The Internal Revenue Service (IRS) will automatically enroll taxpayers by using their 2019 or 2020 tax return and any updated 2021 tax information to determine if they qualify. Starting July 15, taxpayers that meet the criteria below will receive their monthly payments:
- Filed 2019/2020 tax return and claimed CTC OR used the Non-filer Tool to provide the IRS with your information
- Your Modified Adjusted Gross Income (2020 IRS Form 1040, line 11, or the 2019 IRS Form 1040, line 8b) is below $75,000 and $460,000 (plus foreign, Puerto Rico or American Samoa income considerations)
- You or your spouse stayed in the U.S for more than ½ of the year
- You have a Qualifying Child with a social security number who is less than 18 years. A qualifying child:
- is a taxpayer’s child, stepchild, eligible foster child, brother or sister (step or half), or their descendant?
- does not provide more than 50 % of his/her living, feeding, and other support
- lives with the taxpayer for more than 6 months of the year (births, deaths, and temporary absences for schooling or vacation are exceptions)
- is a U.S Citizen or U.S Tax Resident Alien (Green Card or Substantial presence)
The IRS has provided a CTC Update Tool that taxpayers can use to determine if they have been automatically enrolled, to stop the payments and to provide or change bank details starting with August deposits. Changes to your dependents, marital status, income and to re-enroll will not be available until late summer. Additionally, if you filed a joint tax return, any changes you make on the IRS CTC Update tool will only affect you, not your spouse.
The chart below lists the income threshold and the Advanced Child Tax credit by income level:
If the CTC Update Tool shows your payment was sent and you have not received it (5 days after direct deposit, 4 weeks after the check was mailed for U.S, and 9 weeks for foreign address), you can complete Form 3911 to trace your payment and mail it to the address you normally mail your tax return.
Considering that the Advanced Child Tax credit is calculated based on prior-year tax information, it is important that all taxpayers use the CTC Update Tool to avoid receiving more credit than they are entitled to, otherwise known as Excess Advanced Premium Tax Credit. This excess will be determined at the time of filing 2021 tax return as a result of changes that occurred and were not updated in the CTC Update portal, such as:
- Increase in 2021 income
- Change in filing status
- The main home was outside the U.S for more than ½ of the year
- A qualifying child (see criteria above) in prior years is no longer eligible to be claimed as your qualifying child
In the case of a separation where the ACTC was deposited in your ex-spouse account, but you are the custodial parent for 2021, you and your ex-spouse should visit the CTC Update tool and provide updated information. If that fails, obtain a signed Form 8332 and submit it with your upcoming 2021 return.
In conclusion, it is highly recommended to ensure that you have the most up-to-date information reflected in the Child Tax Credit Update Tool to ensure you avoid any Excess Advanced Child Tax Credit repayments in 2022.