COVID Tax Tip 2021-167, November 10, 2021
The IRS recently launched a new feature in its Child Tax Credit Update Portal, allowing families receiving monthly advance child tax credit payments to update their income.
Families should enter changes by November 29, so the changes are reflected in the December payment. Once the update is made, the IRS will adjust the payment amount to ensure people receive their total advance payment for the year. For married couples, if one spouse makes the income update, it will apply to both spouses and could impact both spouses’ future monthly advance payments of the child tax credit.
Who should use the income feature
The new income feature can help families make sure they are getting the right amount of advance child tax credit payments during 2021. It is especially useful to any family who wants to raise or lower their monthly payments because their 2021 income changed substantially from 2020.
In many cases a big income swing can raise or lower a family’s monthly payments. Normally, this means that small changes in income will not impact the payment amount and need not be entered into the CTC UP.
Changes made before midnight on November 29 will only impact the December 15 payment, which is the last scheduled monthly payment for 2021. Payments in 2021 could be up to $1,800 for each child under age 6 and up to $1,500 for each child ages 6 through 17.
Families need to claim the remaining portion of their child tax credit on their 2021 tax return.
Who may qualify for a bigger payment
In some cases, families currently receiving monthly payments that are below the maximum may qualify to have their payments increased. For example, they experienced job loss during 2021, or for some other reason are receiving substantially less income this year. If the reduction in income is large enough, reporting that change now may increase the amount of their advance CTC payments for the rest of this year.
For any family already receiving the maximum payment, a drop in income will not increase the payment amount.
Most families are receiving half of the total CTC through monthly payments. This means any changes they enter in the CTC UP will increase or decrease their monthly payments to ensure they receive half of their total expected credit before the end of 2021.
Who should have their payments reduced
Any family whose income rose substantially in 2021 should consider using the Child Tax Credit Update Portal to update their income and have their payments reduced. This is especially true if they are now receiving the maximum monthly payment, and they expect to qualify for less than the full credit when they file their 2021 federal income tax return. For more information on calculating the CTC, see Topic C of the agency’s frequently asked questions. Families who qualify for less than the full amount should see QC 4 and QC 5.
Using the portal to report income changes
Only families who are already eligible for and receiving advance CTC payments based on their 2020 tax return can use the CTC UP to update their income. Someone who filed a joint return for 2020 can only update their income if they plan to file a joint return for 2021 with the same spouse. IRS representatives cannot process income changes over the phone or at Taxpayer Assistance Centers.
After a family completes an income update, the CTC UP will acknowledge the change but will not display the change. Likewise, IRS representatives won’t be able to confirm an update.