36 Million Families Will Receive an IRS Notice in the Coming Weeks About the Advanced Child Tax Credit

More than 36 million families will receive letters from the IRS in the coming weeks. But this time, it’s good news and you can ease your clients' worry when they call you freaking out. Starting July 15, all eligible households will start receiving advanced Child Tax Credit payments every month through December of this year. In part with the American Rescue Plan, the goal of this credit is to lift more than five million children out of poverty.

What We Know

These early payments represent 50% of the estimated amount of the Child Tax Credit that your clients may claim on their 2021 tax return for the 2022 tax filing season. For each child younger than 6-years-old, families will receive up to $300 monthly, and for each child ages 6-17, they will gain $250. Eligibility for this payment does not impact other on-going government benefits that your client might be receiving, and the payments are non-taxable when it comes to reporting income on their 2021 return. Qualified clients can rest assured knowing that the payments will be dispersed on the 15th of each month, unless that falls on a weekend or holiday.

Who’s Eligible? 

Most families are eligible for the payments; the full credit is available to married couples who have children and jointly file taxes with an adjusted gross income less than $150,000. For individuals with children, their income must be less than $75,000. The enhanced credit will phase out for those making more than $150,000 jointly and $75,000 for individuals. Payments will cease for those making more than $170,000 jointly or $95,000 for individuals, according to the IRS. 

What You Should Know

The IRS unveiled a new online tool this week to help determine eligibility for each household. This tool is not meant to be used for updates to a client's financial status or qualifications. (Stay tuned for a separate interface coming soon called the Child Tax Credit Update Portal.) Filling out this form will also determine if your client is eligible for a third Economic Impact Payment if they missed out on the first and second stimulus checks. If applicable, payments will be automatically issued when your client enters their direct deposit information, so there’s no need for them to ask you to keep track of their refund. If you decide it is in your clients’ best interest NOT to claim the full credit, there will be an additional interface option unveiled to unenroll before the first Child Tax Credit is made on July 15.