Beginning this week, the IRS will start sending out checks for half the amount taxpayers are eligible for - essentially an advance on an anticipated 2021 refund. Those eligible for only the $2000 credit will receive $166.66 per month for the next six months. Those eligible for $3000 will receive $250 and those eligible for $3600 will receive $300. Letters have started to go out to taxpayers advising them of how much they will receive.
For some taxpayers, receipt of this advance will create problems when they file their 2021 tax return and have to reconcile the advance -
- Refunds will be reduced by the amount of the advance and could cause taxpayers to have to pay rather than receiving the refund they're used to getting.
- Taxpayers who receive the higher refunds based one their 2020 income may not be eligible for the higher amount if their 2021 income is over the income limits.
- Taxpayers who receive an advance because they claimed a dependent child in 2020 but don't claim that child on their 2021 return will have to pay the advance back. Divorced parents who alternate claiming children will be particularly impacted by this provision of the Plan.
Taxpayers may opt out of the advanced payments by going to the IRS website - www.irs.gov.
Additional information about the advanced payments is available at both the IRS website and at www.childtaxcredit.gov.