The Internal Revenue Service promised it would let families update their income on the Child Tax Credit portal to rightsize their payments this fall, and today announced that the income update functionality will be up and running on Monday, November 1. That’s also the only day—until midnight—you can make updates that will affect your November 15 payment.
In a news release today, the IRS urged families to enter any significant income changes on Monday by midnight on the Child Tax Credit Update Portal. If you miss that deadline, you can make updates through Monday, November 29 to apply to your December 15 payment.
This applies to families with big income swings in 2021 vis a vis 2020. In many cases, a big income swing can either raise or lower a family’s monthly payments. Once updates are made, the IRS will adjust the remaining payment amounts to ensure people get the total advance payment for the year.
Why does it matter that you get this right? Remember the advance child tax credit is an advance, meaning you could get a smaller refund or owe more when you file your 2021 taxes next spring if the IRS payments are higher than they should be. Conversely, if you lost a job in 2021 and your income is lower, you might be due higher payments than you’re getting automatically. It’s better to get the money earlier than waiting for a true up on your tax return.
Thanks to the American Cares Act, some 35 million families are getting advanced monthly payments of half of their federal child tax credit—and many are getting enhanced payments. You get the other half when you file your 2021 income tax return in 2022. The maximum Child Tax Credit payment is $300 per month for each child under age 6, and $250 per month for each child ages 6 to 17. November 15 and December 15 are the last two days for monthly payments for 2021, which started in July.
The update portal also lets you switch from receiving a paper check to direct deposit, change the account where your payment is direct deposited, update your address, or stop monthly payments for the rest of 2021.
What about 2022? For now, the special payments end in December But the latest version of the Build Back Better Act that Democrats are pushing through Congress includes a one-year extension of the enhanced Advanced Child Tax Credit and permanent refundability—meaning families with little or no income will get the credit (previously you only got the credit to the extent you had earned income). Some advocates want more: The Children’s Defense Fund, for one, is calling for a permanently expanded Child Tax Credit that restores immigrant families’ eligibility.
Who should have their payments reduced? Any family whose income rose substantially in 2021 who is receiving the maximum monthly payment and expects to qualify for less than the full credit when they file their 2021 taxes. The Child Tax Credit begins to be reduced to $2,000 per child if your modified adjusted gross income in 2021 exceeds $150,000 if fleeing a joint return, $112,500 if filing as a head of household or $75,000 for single filers. There’s a second phase-out that reduces the basic (not enhanced) $2,000 Child Tax Credit for high-income taxpayers. That reduces the credit by $50 for each $1,000 your modified AGI exceed $400,000 if you file a joint return or $200,000 for other filers. (Families who earn $440,000 are shut out of the Child Tax Credit.)
The only way you can let the IRS know about income changes is through the portal. IRS representatives can’t process income changes on the phone lines or at Taxpayer Assistance Centers. The IRS notes that after an income update is completed, the portal will acknowledge a change was made but representatives won’t be able to confirm that an update was made. So don’t call the IRS!