The IRS determined the amount of your advance Child Tax Credit (CTC) payments by estimating the amount of the Child Tax Credit that you may properly claim on your 2021 tax return. This estimate was based on information shown on your processed 2020 tax return. If your 2020 tax return had not been processed when the IRS determined the amount of your advance CTC payment for any month, the IRS estimated the amount of your 2021 Child Tax Credit based on information shown on your 2019 tax return.
The IRS used the following steps to calculate the advance payments:
- Reference Taxable Year: The IRS used your 2020 tax return as the reference taxable year. If your 2020 return was not available, the IRS used your 2019 tax return.
- Qualifying Children: The IRS considered the number of qualifying children claimed on your reference tax return. For 2021, a qualifying child is defined as a child who has not attained the age of 18 by the end of the year.
- Modified Adjusted Gross Income (MAGI): The IRS used your modified adjusted gross income (MAGI) from the reference tax year to determine eligibility and phaseout thresholds. The thresholds for the maximum credit are:
- $150,000 for married couples filing jointly and qualifying widows and widowers,
- $112,500 for heads of household, and
- $75,000 for all other taxpayers.
- Advance Payment Calculation: The IRS calculated the advance payments to be 50% of the estimated Child Tax Credit for 2021. The total advance payments were divided into equal monthly payments made from July 15, 2021, through December 15, 2021.
- Adjustments: If your 2020 tax return was processed after the initial determination, the IRS recalculated your advance CTC payments and adjusted any remaining monthly payments accordingly.
- Non-Filers: Eligible taxpayers who did not normally file a tax return could register for the monthly advance payments using the Non-filer Sign-up Tool.
The IRS provided advance payments automatically based on the above criteria, and taxpayers could unenroll from receiving advance payments if they chose to do so.
Sources:
Notice 2021-46
§ 24. Child tax credit
Rev. Proc. 2022-12
Publication 5534-B (06/2021)
IRM Part 21. Customer Account Services. Chapter 6. Individual Tax Returns. Section 3. Credits
Rev. Proc. 2021-24
