The 411 on the CTC
The majority of eligible households will NOT need to take any action in order to receive the upcoming Child Tax Credit (CTC).
The advanced payments will start directly depositing into bank accounts on July 15, and monthly on the 15th through this year unless that day falls on a weekend or holiday. For any client who has NOT filed a 2020 or 2019 tax return, there could be issues if they expect to receive CTC payments as their eligibility will be skewed without recent tax return information, and then there’s also the issue of the IRS not having updated bank account info. Advise those clients to send in the information you need to complete their return ASAP if they want the monthly cash boost.
By accepting the monthly payments now (and not actively opting out), you can clear any confusion for your clients who think they will still receive a lump sum at the end of the 2021 filing year — that is NOT the deal. If any of your clients have lengthy, complicated tax planning processes in play, you may want to advise them to opt out of the monthly payments. In that case, keep your eye out for the IRS to launch the new Child Tax Credit Update Portal, which is where folks can elect to opt out. Households which do opt out will be eligible again to receive a lump sum CTC payment after filing their 2021 return next spring.
And last but not least, the CTC payments are nontaxable when it comes to filing 2021 returns. For more detailed information, read our blog summary.
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