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Managing your advanced child tax credit payments

Eligible individuals recently started receiving advanced child tax credit payments. New in 2021, the IRS determined if you are eligible for the child tax credit based on your prior year tax return and instead of waiting to receive this credit as part of your refund when you file your tax returns the IRS is giving you the money ahead of time. If the IRS has deemed you eligible for the credit they just started sending out monthly payments automatically to you, usually the 15th of the month. The good news is that the IRS has created a portal where you can manage or stop these payments:

Some functions of the portal include:

• Switching from a paper check to direct deposit – If the IRS does not have your bank account information on file they will send you a paper check. You can use the portal to enter your bank account information to begin receiving the payments via direct deposit.
• Stopping the payments – If you do not want to receive these advance payments you can unenroll on the portal. If you qualify for the credit it will factor in as a lump sum when you file your tax return if you unenroll. For married couples, each spouse needs to unenroll in order to completely stop the payments. If only one spouse unenrolls then the IRS will send half the payment to the other spouse that did not unenroll.

One reason you would want to stop the payments is if you do not qualify for the child tax credit in the current year (you did qualify in the prior year which is what the IRS is basing the qualification on). Children no longer qualify for the credit once they turn 18. So if at the end of the year your child is 18 years old, that person no longer qualifies for the credit in the year the person turned 18.

It is also very important to keep track of all the payments you received during the year, you will need to give that amount to your accountant when you go to file your 2021 tax return.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

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