How to Declare the Child Tax Credit

In 2021 families across the country received advanced payments from the federal government in advance of  the Child Tax Credits.  Now parents filing tax returns want to know how to declare the child tax credit on tax returns on their annual tax returns.  Here are some pointers to help.

Advance Child Tax Credit

Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS processed your 2019 tax return or 2020 tax return before the end of June, these monthly payments began in July and continued through December 2021, based on the information contained in that return.

Advance Child Tax Credit Amounts

An eligible individual’s total advance credit payment amounts equaled half of the amount of the individual’s estimated 2021 Child Tax Credit. This amount was then divided into monthly advance payments.

As a result:

• For each qualifying child aged 5 or younger, an eligible individual generally received $300 each month. That was determined by dividing $3,600 in half, which is $1,800. Six monthly payments of $300 provided the eligible individual with $1,800.
• For each qualifying child ages 6 to 17, an eligible individual generally received $250 each month. That was determined by dividing $3,000 in half, which is $1,500. Six monthly payments of $250 provided the eligible individual with $1,500.

IRS Letters in the Mail

To help taxpayers reconcile and receive their full 2021 Child Tax Credit, the IRS is sending IRS Letter 6419, Advance Child Tax Credit Reconciliation for payments sent for late December 2021 through January 2022. Taxpayers should keep this, and any other IRS letters about advance Child Tax Credit payments, with their tax records. If households have not received the letter for any reason, recipients should register for an IRS online account to obtain the official amounts paid.   Taxpayers should ensure the amount of Child Tax Credit payments reported match the IRS numbers to avoid problems.

Taxpayers who received an advance Child Tax Credit payment should file a 2021 tax return to reconcile the amount due versus what was received to ensure getting all eligible amounts due. 

File Accurate Returns

Filing accurate returns is especially important to avoid delaying refunds and potential tax credits. Once accurate returns are filed electronically, payments with refunds set to be issued via direct deposit, tax filers will generally receive their refunds 21 days after filing. Filing inaccurate returns may result in additional review of your returns possibly delaying  your refund for months as the IRS works through its  backlog of returns.    Best advice is to verify your Child Tax Credit amounts via the IRS online account.

December 2021 Problems

A small number of taxpayers who moved or changed bank accounts in December of 2021 may have received a letter from the IRS letters indicating an incorrect amount of the tax payment received due to undeliverable refund checks returned  or rejected direct deposits.  If applicable, open an online account at IRS.gov to ensure the accuracy of your return.

Married Filing Joint Returns

Taxpayers filing returns as Married Filing Jointly should have received separate letters reflecting half the payments received. These taxpayers will need to combine the payments received information when filing the joint return. Again, make sure the combined total match the amount shown on the IRS online account.   

How to Report Advance Payments on 2021 Tax Returns

If you received advance payments, it must be reported on the 2021 tax return with any other eligible amounts due.  

To reconcile — or compare — the amounts received versus the amount of eligible credit,  taxpayers should:

• Obtain the advance payments total and number of qualifying children from the IRS online account or refer to IRS Letter 6419.
  
• Enter that information when preparing y Schedule 8812 of Form 1040.

• If Married Filing Jointly, remember to check the amounts for both spouses and add the advance payments together to get the total amount.

What if Letter 6419 has a different advance payment total than expected? Use the figures in the online account portal. For most taxpayers, the advance payments total in Letter 6419 will match the total in the IRS Online Account.

The IRS Online Account has the most accurate information.

If problems arise, you may want  to seek the help of a tax professional. There are several free resources available to help you properly declare the tax credit on tax returns and receive refunds in a timely manner.  Otherwise, the tax attorneys are RJS LAW are available for a free consultation.

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