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What you should know about advance child tax credit payments

IRS has begun sending letters to taxpayers eligible for the Advance Child Tax Credit. Monthly payments are scheduled to begin mid-July. Payment amounts will be based on the number of children claimed on the 2020 tax return and their ages.

The payments are subject to an income phase-out. Here are the rules:
– Children age 5 and younger – $300 per month (full credit on the 2021 return is $3,600)
– Children age 6 to 17 – $250 per month (full credit on the 2021 return is $3,000)

Taxpayers with Modified Adjusted Gross Income under the following amounts are eligible for the full credit amount:
– Married Filing Joint or Qualifying Widow(er) $150,000
– Head of Household $112,500
– Single or Married Filing Separate $75,000

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If the modified AGI is over the limit, the amount is reduced by $50 for every $1000 over the limit.

Note: If the 2020 return hasn’t been filed, IRS will base the payments on the 2019 return. Families can expect the first payment to be made around July 15, 2021 and continue monthly on the 15th of each month unless the 15th falls on a weekend or holiday. Payments will be sent to the account used for your 2020 refund (or 2019) or to the physical address on your return.

Most people don’t have to do anything to get the advance payments. However, if you want to opt out of the monthly payments and receive the full credit on your tax return, you will need to take action. IRS is launching an online portal the week of June 21 to allow families to unenroll from receiving the monthly payments. Later this year, IRS will provide a method to update changes in direct deposit information, income, filing status, or number of qualifying children.

** It is always recommended that you keep a log of any payments received from IRS including date, amount, and reason for the payment.

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Keep reading Tax Tips Tuesday for more information on the Advance Child Tax Credit as it becomes available
from IRS.

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