Reconciling your advance Child Tax Credit payments involves a comparison process to ensure that the amount of advance payments you received aligns with the amount of Child Tax Credit you are eligible to claim on your tax return for the relevant year. Specifically, it means comparing the total amount of advance Child Tax Credit payments received during 2021 with the amount of Child Tax Credit you can properly claim on your 2021 tax return.
Here are the key points involved in the reconciliation process:
- Comparison of Amounts:
- You need to compare the total advance Child Tax Credit payments received during 2021 with the amount of Child Tax Credit you are eligible to claim on your 2021 tax return.
- Possible Outcomes:
- Remaining Child Tax Credit Amount: If the advance payments were less than the amount you can claim, you can claim the remaining amount on your tax return.
- Excess Advance Child Tax Credit Payment Amount: If the advance payments exceeded the amount you can claim, you may need to repay some or all of the excess amount to the IRS.
- No Excess or Remaining Amount: If the advance payments match the amount you can claim, you have received the full amount of the Child Tax Credit for which you are eligible.
- Filing Requirements:
- To reconcile the payments, you must complete and file a 2021 Federal income tax return. This process involves using Schedule 8812 (Form 1040) to determine the correct amount of the Child Tax Credit.
- Safe Harbor Provisions:
- There are safe harbor provisions based on modified Adjusted Gross Income (AGI) that may reduce or eliminate the repayment amount if the advance payments exceed the allowable credit.
- Electronic Filing:
- Electronic filing options can help you perform this comparison accurately and quickly. Tax preparation software can assist in reconciling the Child Tax Credit based on the information you provide.
In summary, reconciling your advance Child Tax Credit payments ensures that the advance payments you received are accurately reflected and adjusted on your tax return, either by claiming additional credit or repaying any excess amount.
Sources:
Rev. Proc. 2022-12
§ 1.36B-4. Reconciling the premium tax credit with advance credit payments.
Publication 971 (12/2021)
