November 1, 2021

The IRS recently answered a number of common questions about the 2021 Child Tax Credit (CTC) advance payments that Americans began receiving in mid-July. Here are the highlights:

Do I have to pay tax on the CTC Advance Payments?

No. The CTC is a tax credit. As long as you qualify for the credit, the advance payments do not count as income and are not taxable. You can check your eligibility using the IRS Advance CTC Eligibility portal (link below).

Will Advance CTC Payments disqualify me for other federal programs?

No. Because these payments are not income, they will not affect eligibility for federal programs with income limits, like the Earned Income Credit, Pell Grants, or higher education credits.

Will Advance CTC Payments disqualify me for other federal programs?

No. Past-due taxes, overdue child support, and other federal or state debts will not affect CTC advance payment amounts. However, these issues may affect a taxpayer’s final CTC amount when they file their 2021 tax return, possibly reducing their refund or increasing their tax. Also, some states do allow reduction of CTC advance payments to cover a taxpayer’s private debts.

I’m eligible for the 2021 CTC but my advance payments are delayed?

The most common reason for a delay in receiving advance CTC payments is that the IRS does not have your current mailing address or banking information. Check the IRS Advance CTC Update portal (link below) to see if you need to update your info. The IRS is also withholding advance CTC payments to victims and possible victims of tax-related identity theft, to prevent further fraud. These payments will be sent when the ID theft cases are resolved.

If you are unsure whether it is best for you to accept CTC advance payments, or to opt out and claim the entire credit when you file your 2021 tax return, a tax professional can help you decide.

IRS Advance CTC Eligibility portal: https://www.irs.gov/credits-deductions/advance-child-tax-credit-eligibility-assistant

IRS Advance CTC Update portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

November 1, 2021

If your refund amount is different than stated on the filed tax return, part or all of your refund may have been used to pay off (offset) past-due federal tax, student loans, state income tax or other past-due debts.

You’ll receive a notice from the IRS if such an offset occurs that will show the original tax refund amount, the offset amount, as well as the name, address and telephone number of the agency receiving the payment.

If you haven’t received your refund yet, you may be able to check the status using the IRS’ “Where’s my Refund?” tool: https://www.irs.gov/refunds.

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Posted on November 1, 2021