With the first month of Advance Child Tax Credits hitting bank accounts and mailboxes last week, we are receiving many questions from our clients who received a payment but were not expecting one. Most of these clients fall in to one of three situations.
- Taxpayers with high incomes may still receive an advance payment. Under the new rules, the Child Tax Credit increased from $2,000 to $3,000 ($3,600 for children under the age of 6) for 2021. A portion of this tax credit is phased out, beginning with Adjusted Gross Income (AGI) of $150,000 for married couples ($75,000 for single and $112.500 for Head of Household). However, for the credit to be reduced below $2,000 per child, married taxpayers must have AGI over $400,000 ($200,000 for all other filing statuses). Where we have seen confusion is that taxpayers with AGI between $150,000 and $400,000 that did not unenroll will still receive an advance payment in July. This is because while their income was too high to get the full amount of the tax credit, they are still eligible for the smaller credit. As a result, you will need to unenroll, to stop the advance payment checks based on the lower credit amount.
- Taxpayer must unenroll before the monthly deadline. The IRS set deadlines each month to unenroll from receiving the advance payments. For the July payment, taxpayers needed to unenroll prior to June 28th to not receive the first payment. Taxpayers who unenrolled after this date should receive the July 15th payment, but should not receive another payment thereafter. If you unenrolled after the June 28th deadline, you should have received the July payment, but should receive none further. If you have not yet unenrolled but would like to, you should do so before August 2nd in order to not receive the next payment.
- Taxpayer and Spouse both must unenroll. If only one taxpayer on a joint return unenrolls from receiving the advance payments, a payment will still be issued for half of the amount that they would normally be eligible for jointly. Both taxpayers must unenroll to not receive any payment.
If you believe you unenrolled timely for the first payment, but still received one, you may want to log back into your IRS online account to verify your enrollment status. The link below should redirect you to the login screen, where you can choose to Manage Advance Payments.
If you haven’t already unenrolled but would like to do so, click on the link below for instructions.
Feel free to call us with any additional questions on this matter.