June 2021: Advance Child Tax Credit

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Advance Child Tax Credit:

What You Need to Know

Beginning July 2021, you and your family may be eligible for advance payments on the Child Tax Credit (CTC). The American Rescue Plan Act (ARPA) of 2021 has changed how the CTC is being utilized for the 2021 tax year, in an effort to provide families with more support throughout the year. This change will cover 88% of children in the United States.

The Advance Child Tax Credit changes two major items for 2021: the amount of the CTC, and the timing of the credit.
Looking at the amount, families who can take the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 and up to $3,600 per qualifying child under age 6. This is a significant change, as the maximum CTC has historically been $2,000 per qualifying child.

 

Regarding timing, families will be able to receive up to 50% of their CTC in advance throughout 2021. This is different from prior years, where the CTC was applied only after the end of the year on your tax return.
When will you start receiving advance CTC payments?
  • Monthly, starting July 2021 (next month!) and ending December 2021
  • Payments are set for the 15’th of each month

 

How much will your advance payment be?
  • Per the IRS, the payment can be up to $300 per month for each child under 6, and up to $250 per month for each child 6 and older
  • NOTE: although these payments are not taxable, please keep a record of each payment received, and please provide this information to us with your 2021 tax information at the end of the year. We will use this information to reconcile your CTC.

 

Income Thresholds:
  • If you are a married taxpayer and your income is below $150,000, you are eligible to receive the full advance CTC
  • If you are an unmarried taxpayer and your income is below $112,500, you are eligible to receive the full advance CTC

 

Considerations for Higher-Income Taxpayers:
  • If your income is between the amounts below, the advance payments are subject to reduction:
  • $150,000 – $440,000 for married filing joint (MFJ) taxpayers
  • MFJ with income at or above $440,000 – not eligible for the CTC
  • $112,500 – $240,000 for unmarried taxpayers
  • Unmarried taxpayers with income at or above $240,000 – not eligible for the CTC

 

Final Thoughts:
  • Other than filling your 2020 tax return, no further action is needed from you to receive advance CTC payments
  • If you have not yet filed your 2020 tax return, the IRS will use your 2019 tax information to determine your eligibility

 

For more information on the Advance Child Tax Credit, please visit the IRS website here as they continue to provide updates.
As always, please reach out if you have any questions about these new provisions.

Employee Spotlight

 

Forrest McKay

Forrest McKay

Forrest, a California native, joined Soukup, Bush & Associates as an intern for the 2013 and 2014 tax seasons before formally joining the firm as an associate in May of 2015 following his graduation. Forrest received his B.S. in Business Administration, Accounting, along with his Master of Accountancy from Colorado State University. He is responsible for the preparation of individual and business tax returns, along with overseeing IT operations for the firm.

In his spare time, Forrest enjoys exploring Colorado, reading, playing card games, and spending time with his wife, Stephanie, and their two mini Dachshunds, Oliver and Otis.

Filing Deadlines

SEPTEMBER 15, 2021 – Federal and state income tax returns are due for flow-through entities, including partnerships and S-Corporations if extended

SEPTEMBER 30, 2021 – Federal and state income tax returns are due for trusts if extended

OCTOBER 15, 2021 – Federal and state income tax returns are due for individual taxpayers and C-Corporations if extended

2021 Estimated Payment Deadlines

JUNE 15, 2021 – 2nd quarter estimated payments for 2021 are due to the IRS and Colorado Department of Revenue

SEPTEMBER 15, 2021 – 3rd quarter estimated payments for 2021 are due to the IRS and Colorado Department of Revenue