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IMPORTANT UPDATE: IRS Opens Portals for Advanced Child Tax Credit Payments 2021

Client Alert
May 20, 2021

UPDATE

The IRS opened two portals for the Advanced Child Tax Credit payments. Taxpayers who wish to opt-out of the advanced child tax credit payments will need to use the “unenroll from advanced payments” portal. Taxpayers who were not required to file a tax return and have not already submitted his/her information should use the “enter your information” portal to receive the advanced child tax credit payments. The portals can be found at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.

May 20, 2021

The American Rescue Plan Act (the “Act”) expands the Child Tax Credit for tax year 2021. In addition to expanding the Child Tax Credit, the Act provides for advance payments of the 2021 Child Tax Credit.

Beginning in July, the IRS will automatically send Advanced Child Tax Credit payments to eligible taxpayers based on their 2020 tax return (or 2019 tax return if the 2020 tax return has not been filed and processed yet). The amount of the advanced payment will be up to $300 each month for each qualifying child under 6 years old at the end of 2021 and $250 each month for each qualifying child between 6 and 17 years old at the end of 2021. For example, if you have 2 qualifying children, one 4 years old and one 8 years old, you may receive up to $550 each month in advance child tax credit payments.

These payments are an advance on the child tax credit a person will claim on his/her 2021 tax return. Therefore, when a person files his/her 2021 tax return, the child tax credit amount will be reduced by the total amount of advance child tax payments received between July and December. That means that you may be required to repay some or all of the advanced child tax credit on your 2021 tax return.

Who is an eligible taxpayer?

Eligible taxpayers are:

  • Married taxpayers filing a joint return or Qualifying Widows with income up to $150,000;
  • Head of Household taxpayers with income up to $112,500; and
  • All other taxpayers with income up to $75,000.

Who is a qualifying child?

A qualifying child is one who:

  • Has a valid social security number
  • Lived with the eligible taxpayer for at least half the year
  • Is related to the eligible taxpayer
  • The eligible taxpayer provides more than 50% of the child’s support

What does this mean?

This means that unless a person opts out, he/she will automatically receive advance child tax credit payments. Therefore, the refund amount you are expecting may be reduced. This also means that parents that alternate claiming a dependent on their tax returns may now owe money to the IRS in 2021 rather than receiving a refund.

In the coming months, the IRS has stated taxpayers will have the opportunity to opt out of the advance child tax credit payments. The IRS has also stated taxpayers will have the opportunity to update information with the IRS such as filing status or number of qualifying children.

For additional questions related to the advance child tax credit payments, please contact BMD Tax Law Attorney Tracy Albanese at tlalbanese@bmdllc.com or (330) 253-9195.

Tax LawTracy L. AlbaneseChild Tax Credit
Client Alert

Bankruptcy Law Changes - 2020 Recap And What To Expect In 2021

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January 7, 2021Late yesterday (January 6, 2021), the U.S. Small Business Administration released rules and guidance for businesses wishing to take part in the long awaited second round of Paycheck Protection Program (“PPP”) funding. As most businesses are aware, the rules governing PPP loans have been updated as part of The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Act”). The Act was just one section of the massive 2021 Consolidated Appropriations Act that was passed by Congress and signed into law by the President on December 27, 2020. To combat the ongoing disruptions caused by the COVID-19 pandemic, the Act generally provides (a) first time PPP loans for businesses that did not obtain a loan in the first instance, (b) PPP second draw loans for businesses that already obtained a loan but need additional funding, and (c) additional funding for businesses that returned their first PPP loan or did not get the full amount for which they qualified.Client Alert

UPDATE - Vaccine Policy Considerations for Employers

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Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.
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