DEAR SUN SPOTS: Since the new child tax credit will be issued monthly, will our tax return refund be less when we file our 2021 tax return? — No name, no town

ANSWER: First of all, I am not a tax expert. For questions such as this, the best thing you can do is consult with a professional tax preparer or someone in the field of finances with this type of expertise.

That being said, I did find some published information to give you guidance, but please remember that everyone’s situation is different.

The advance payments of the enhanced child tax credit are set to start this month, leaving parents wondering whether they will end up owing on their taxes next year if they use this money now.

For some parents, the answer is yes, they will end up owing money next tax season. Others will be fine, but all eligible parents should review their finances before spending those payments.

These payments are not like the stimulus checks. If you receive an overpayment in child tax credits or your financial situation changes this year so that you have a higher tax bill on your 2021 taxes, the IRS may want you to repay the credit.

The child tax credit payments, amount to $3,000 annually per child ages 6 to 17 and $3,600 annually for children under 6.

Eligible families will receive half of their credit in the form of monthly payments of up to $250 per school-age child and up to $300 per child under 6 from July through December 2021. The other half will be paid out when they file their 2021 taxes. The credit is income-based and starts to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly.

The IRS is prepaying a tax credit that you usually receive when you file your taxes, so if you don’t usually receive a refund, the advance payments could cause you to owe more when you file your 2021 taxes.

If you usually owe when you file your taxes or cut it close, you’ll want to consider opting out of the advance payments or setting a portion of them aside to cover your tax bill.

Other considerations are if you take a higher-paying job, or one parent has gone back to work after being unemployed in 2020. Also, if you sold property at a gain and earned more income in 2021, you could possibly have to pay the credit back when you file your 2021 tax return. Lastly, divorced parents should also be cautious, especially if they share custody of the children.

If you are in those categories, or you can afford not to use the credit payments immediately, you can opt out via an IRS portal, or simply save half of each payment until you file your 2021 return.

For individuals making less than $40,000, or $60,000 for couples filing jointly, if an overpayment is received, you won’t need to repay the amount.

To avoid running into issues, review your 2020 tax return to see where your finances stand then talk to a financial professional about your situation before the first IRS payment on July 15.

The IRS will have online portals available to help.

This column is for you, our readers. It is for your questions and comments. There are only two rules: You must write to the column and sign your name. We won’t use it if you ask us not to. Please include your phone number. Letters will not be returned or answered by mail, and telephone calls will not be accepted. Your letters will appear as quickly as space allows. Address them to Sun Spots, P.O. Box 4400, Lewiston, ME 04243-4400. Inquiries can also be emailed to [email protected]


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