Talking to clients about the advanced child tax credit before July

On this Tax Section Odyssey episode, April Walker, CPA, CGMA, Lead Manager — Association of International Certified Professional Accountants, representing AICPA & CIMA, and Larry Pon, CPA/PFS, CFP, EA, USTCP, AEP — Pon & Associates, review the changes to the 2021 child tax credit (CTC) and discuss the latest news regarding the related advanced payments.

The American Rescue Plan Act enacted in March 2021 temporarily expands the CTC amount for certain taxpayers, made the credit fully refundable (meaning taxpayers can receive it even if they don’t owe the IRS) and directs the IRS to make advance payments equal to 50% of IRS's estimate of the eligible taxpayer's 2021 CTCs during the period July 2021 through December 2021.

In a letter currently being sent to taxpayers, the IRS explains that taxpayers will automatically receive advance CTC payments —assuming they are otherwise eligible to receive the CTC — for 2021.

To date, the IRS has unveiled the following:

• Child Tax Credit Eligibility Assistant – allows families to answer a series of questions to determine whether they qualify for the advance payments
• Child Tax Credit Update Portal – allows families to verify their eligibility for the payments and gives them an option to unenroll from receiving the monthly payments
• Child Tax Credit Non-filer Sign-up Tool – allows families who are not required to file a tax return but who are otherwise eligible for the payments to report their qualifying children.

What you’ll learn in this episode

• Changes to the CTC for 2021 (1.13)
• What we know about the advance payments (3.50)
• How qualifying children are defined for the advance CTC (5.29)
• What practitioners should be discussing with clients in the next few weeks and related financial planning tips (6.28)
• Scenarios in which practitioners should advise clients to opt out of receiving advance payments and what is involved in the opt-out process (9.33)
• Tips for billing clients for work in this area (14.41)
• The CTC in 2022 and beyond (16.50)

AICPA resources

• Child Tax Credit Client Letter – Client letter template for tax practitioners to use to notify their clients about the child tax credit changes and encourage clients to contact their CPA for additional tax and financial planning guidance.
• Child tax credit: New portal for opting out of advance payments – The Tax Adviser article published June 22, 2021 detailing the latest about the new portal.

Other resources

• Advance Child Tax Credit Payments in 2021 – The IRS dedicated site that houses information related to the advance CTC payments as well as the eligibility assistant, update portal and non-filer sign-up tool
• 2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently Asked Questions – Consolidation of answers to frequently asked questions related to the CTC and the advanced payments, separated by topic
• Proc. 2021-24 – Procedures for individuals who are not otherwise required to file federal income tax returns for taxable year 2020 to receive advance child tax credit payments under Sec. 7527A.

Note, if your podcast app does not hyperlink to resources, visit https://taxodyssey.libsyn.com to access show notes with direct links.

This episode is brought to you by the AICPA's Tax Section, your home base to maintain your professional edge. To learn more about the Tax Section, check out aicpa.org/tax or sign up for a free web tour.