IRS Letters re: Advanced Child Tax Credit and Economic Impact Payments

If you benefited from advance Child Tax Credit payments or the third round of Economic Impact Payments, watch your mail for a letter from the IRS. The IRS has begun issuing information letters, designed to reduce errors and delays in processing returns.

The official name of the Child Tax Credit letter is “Letter 6419, 2021 advance CTC.” It began mailing late last month. The letter will include the total amount of advance CTC payments you received in 2021 and the number of qualifying children used to calculate the advance payments. The IRS advises keeping this and any other IRS letters about advance CTC payments with your tax records.

 

If you received advance payments, you’ll need to compare those with the amount of the CTC you can properly claim on your 2021 tax return. You can also check the amount of your payments by using the CTC Update Portal available on IRS.gov.

If you were eligible but did not receive advance CTC payments in 2021, you can still claim the full amount when filing your 2021 tax returns; this includes families who don’t normally need to file returns.

 

CTC payments were determined this year using 2019 or 2020 tax returns, so it is possible your income changed and you now meet the income threshold to receive the CTC. If so, you should note on your 2021 tax return that you have changed income levels and can no longer claim the CTC.

 

Another reason for a status change could be the number and ages of dependents. Payment amounts depend on the age of qualifying dependents. For example, if your child outgrew the age of the qualifying amount you were receiving in the past year, you’ll need to claim this on your next tax return, which can result in either a reduced payment or a stoppage of payments altogether.

 

The IRS also advises that if you received less than the amount that you’re eligible for, you could claim a credit for the remaining amount of the CTC on your 2021 tax return. If you received more than the amount you’re eligible for, you might need to repay some or all of that excess when you file.

Letter 6475, “Your Third Economic Impact Payment” will begin arriving this month in mailboxes. 

 

That third round, sent beginning in March 2021, were advanced payments of the 2021 Recovery Rebate Credit. Like the advanced CTC payments, the amounts were based on information from prior year returns and will need to be reconciled with your 2021 tax return.

Feel free to reach out to us with any questions.

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