But beware as these payments may have strings attached.
IRS set to start mailing advice “Child Tax Credit”, CTC. Qualifying parents with children younger than 6 will begin receiving $300.00 per child for children under 6 years of age per month, and $250 each for children 6 to 17 per month.
This could cause a problem for many families come tax time if they have come to rely on the CTC to offset their tax bill or so that they get a refund when they file their tax return. This is especially true for those that are self employed and those who use the CTC to reduce their estimated tax payment.
This change is part of the American Rescue Plan and requires no action on the part of taxpayers as the IRS and treasure will automatically make payment to those deemed eligible. It is however important that every taxpayer who received the payment keep track of the amounts received as this information will be needed when it comes time to file your 2021 tax return.
The CTC begins to phased out, when income exceeds $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers. So while one could receive the payment because their 2020 income is less that the phase out, and then have to repay the amounts received if their 2021 income exceeds the phase out.
The IRS is still in the process of updating information on the CTC and advance payments so keep a close eye on the IRS web site https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021, RMS Accounting will also be publishing updates as more information becomes available.