The IRS is poised to start issuing monthly payments of the enhanced child tax credit in July. Taxpayers may have to pay back any excess funds in 2022.
The IRS may start issuing monthly payments of the enhanced child tax credit as soon as July. But some recipients may have to pay back a portion of those funds at tax time next year. The American Rescue Plan directed the federal government to issue advance payments of the child tax credit in periodic installments. It’s one of several changes that largely benefit lower earners. Americans would get up to $300 a month per child, if issued according to the federal government’s timeline. However, the advanced payments are based on an IRS estimate, from available data like income, marital status, and number and age of qualifying kids. Outdated data may trigger an overpayment of the tax credit — and the need to pay back any excess funds. «It would reduce your refund or increase your tax payment next April,» according to April Walker, lead manager of tax practice and ethics at the American Institute of Certified Public Accountants. «That’s how it would be paid back.» Tax returns The IRS is using 2020 tax returns (or, if unavailable,2019 returns) to determine taxpayers’ eligibility for the child tax credit and the amount of the advance payments. The advance payments add up to half of a taxpayer’s total credit for 2021. The American Rescue Plan raised the maximum credit amount to $3,000 per kid ages 6 to 17, and $3,600 for younger children. The remaining half would be claimed during tax season next year. Information reported on next year’s tax return may differ from current IRS data — and therefore change the total credit amount.
