How do I reconcile advanced child tax credit payments received in 2021 on the 2021 Form 1040?
The American Rescue Plan expanded the amount of Child Tax Credit (CTC) allowed for 2021. A portion of the child tax credit was sent as an advanced monthly payment via direct deposit (if available) or check on or around July 15, August 13, September 15, October 15, November 15 and December 15, 2021. In June 2021, the IRS sent out an Advance Child Tax Credit Outreach Letter 6416 (or 6416-A) notifying taxpayers of their possible eligibility. The amount issued was based on the 2020 return (or 2019 if 2020 had not been processed). Advanced payments were up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17. In January 2022, the IRS will issue Letter 6419 to report the total disbursement for use when filing the 2021 individual return.
More information about the Advance Child Tax Credit Payments is available from IRS. More information can be found on IRS.gov. Both the Child Tax Credit Eligibility Assistant and Child Tax Credit Update Portal are also available on IRS.gov. A new government website, https://www.childtaxcredit.gov/, is available to assist taxpayers with verifying eligibility and learning more about the expanded credit.
The Advanced CTC payments must be reconciled when filing the 2021 tax return. Excess advanced payment amounts received will be required to be repaid* in certain circumstances. To reconcile amounts received for the advanced child tax credit, entries must be made on the redesigned 8812 screen in Drake21. Required entries based on Letter 6419 include lines 14f/15e and 30. Check the other options, if applicable. These entries, along with the biographical information entered on screen 2, and answers to due diligence on screen 8867 are used to complete the expanded Schedule 8812 and corresponding worksheets Wks 8812. See Related Links below for details.
Note: If the taxpayer opted out of all of the advanced payments, they will not receive Letter 6419, however, entries on screen 8812 are required to clear EF message 4953. Enter zeros on the 8812 screen for amount received (14f/15e) as well as number of children (30) for taxpayer and spouse, if applicable.
*Figured on Schedule 8812, page 3, part III. The only data entry required is to complete screen 8812 with the amounts from Letter 6419. The software calculates any additional credit or repayment automatically. See Related Links below and IRS Topic H for FAQs on the repayment protection.