05/20/2021
Expanded child tax credit summary:
In 2021, the IRS will be direct depositing or mailing out, starting July 15th, an advance of the child tax credit. If you are eligible, instead of the standard $2,000 per child, you may get as much as $3,600 per child under 6, or $3,000 for children 6 through 17.
Here is more information: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
The caveat to this is that this is an advance of the credit that you normally get at tax filing time. As an example based on 2020 numbers, if you have 2 children, you would get a $4,000 tax credit. In this example, let's say your total federal tax is $10,000, and you had $8,000 withheld from paychecks. If you include the credit, the math is -10,000 + 8,0000 + 4,000 (child tax credit) = 2,000. You would get a refund from the IRS for $2,000.
In 2021 the IRS is going to send you the value of the credit over the course of the year. So let's use the same example but apply 2021's rules. -10,000 (taxes owed) + 8,000 (withheld from paychecks) = -2,000. You owe the IRS $2,000. The difference is that the IRS already sent you the value of the credit ahead of time.
The important piece to take away from this is to take a look at your 2020 tax return, see if you received a refund and how the child tax credit affected your return. Then determine if you are okay spending your child credit as you receive it or savings it to eventually pay part of it back to the IRS.
Please excuse any grammatical errors!!
Information for taxpayers who may receive advance Child Tax Credit payments in 2021.
