As described in our newsletter for the month of April this year, the American Rescue Plan Act (ARPA) expanded the Child Tax Credit (CTC) for 2021 to provide more help to eligible households. For 2021, the credit increases and the age for a qualifying child are extended to 17. The credit amount rises to $3,000 for children ages 6 through 17 at the end of 2021 and $3,600 for children ages 5 and under at the end of 2021 and becomes fully refundable to the extent it exceeds the taxes owed. Please refer to our April newsletter for more details.
In addition, half of the 2021 CTC is stipulated to be prepaid by ARPA, and in the last month the Biden administration sent out letters to taxpayers to inform them that advance payment of child tax credit is on the way via check or direct deposit. Below is a sample letter. The actual amount you receive may vary depending on the income level on the most recent tax filed to the IRS. Please keep track of the actual amount that you receive from July through December of 2021 and inform us of the total amount at the time of preparing the 2021 tax return. We will reconcile the correct child tax credit amount based on your 2021 income.
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