The total amount of your advance Child Tax Credit (CTC) payments can be greater than the amount of your 2021 Child Tax Credit due to several factors related to the estimation process and changes in your personal circumstances throughout the year.
- Estimation Based on Prior Year Information: The IRS estimated your advance CTC payments based on information from your 2020 tax return, or if that was not available, your 2019 tax return. This estimate included any updates you provided through the Child Tax Credit Update Portal (CTC UP). The advance payments were calculated to be up to 50 percent of the estimated Child Tax Credit for 2021.
- Changes in Family and Life Situations: Family and life situations can change throughout the year, affecting your eligibility for the Child Tax Credit. Common changes that could cause the total amount of advance payments to exceed the actual 2021 Child Tax Credit include:
- A qualifying child changing homes and not living with you for more than half of the year.
- An increase in your income in 2021, which could phase out or reduce your Child Tax Credit.
- A change in your filing status, which could also phase out or reduce your Child Tax Credit.
- Your main home being outside of the United States for half of 2021 or more.
- Reconciliation on Tax Return: When you file your 2021 tax return, you need to reconcile the advance payments received with the actual Child Tax Credit you are eligible to claim. If the advance payments were based on an overestimation of your eligibility, the total advance payments could exceed the actual credit amount.
- IRS Encouragement to Update Information: The IRS encouraged families to use the CTC UP to report any changes in income or family circumstances or to unenroll from advance payments if they anticipated ineligibility. However, if these updates were not made, the advance payments might not accurately reflect the current year's eligibility.
In summary, the total amount of your advance Child Tax Credit payments can be greater than the amount of your 2021 Child Tax Credit due to the initial estimation based on prior year information, changes in your family and life situations during the year, and the need to reconcile these payments on your tax return.
Sources:
Publication 5534-B (06/2021)
