Advance Child Tax Credit (AdvCTC)
Earned Income Tax Credit(EITC)

by: Income Tax Consultants LLC
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Advance Child Tax Credit (AdvCTC)

The Child Tax Credit in the American Rescue Plan provides the largest Child Tax Credit ever and historic relief to the most working families ever – and as of July 15, 2021, most families are automatically receiving monthly payments of $250 or $300 per child without having to take any action.

The American Rescue Plan increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of six and from $2,000 to $3,600 for children under the age of six, and raised the age limit from 16 to 17.

All working families will get the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent (also called Head of Household).

To claim the Advance Child Tax Credit, you must file a tax return, even if you aren’t typically required to do so. You will receive Letter 6419 from the IRS that will give you the amount you should have received form the monthly Advance Child Tax Credit. It should be 50% of the total amount. If not, you may claim whatever percentage you have left on your Tax Yaer 2021 Tax Return.

Here are some examples of how the Advance Child Tax Credit (and the Earned Income Tax Credit) works:

At the writting of this article, most eligible taxpayers should have got 50% of their full entitled Child Tax Credit for 2021. The next step is to get the remaining 50% in your tax refund when you file your 2021 tax return. To get it, parents need to do the following. They need to take the total amount of your credit last year that's outlined in Letter 6419. Then, you or your tax preparere needs to then input that total onto Form 8812. Parents will get a matching credit either as an increased tax refund, or, if they owe the IRS money, the amount owed will be reduced.

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Earned Income Tax Credit (EITC)

Earned income includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own.

Election to use prior-year earned income You can elect to use your 2019 earned income to figure your 2021 earned income credit (EIC) if your 2019 earned income is more than your 2021 earned income.

Types of Earned Income:
  • Wages, salary or tips where federal income taxes are withheld on Form W-2, box 1
  • Income from a job where your employer didn’t withhold tax (such as gig economy work)
  • Driving a car for booked rides or deliveries
  • Selling goods online
  • Running errands or doing tasks
  • Providing creative or professional services
  • Providing other temporary, on-demand or freelance work
  • Money made from self-employment
  • Own or operate a business or farm
  • Are a minister or member of a religious order
  • Are a statutory employee and have income
  • Benefits from a union strike
  • Certain disability benefits you got before you were the minimum retirement age Nontaxable Combat Pay (Form W-2, box 12 with code Q) If you claim nontaxable combat pay as earned income, it may increase or decrease the amount of your EITC.
Not Earned Income:
  • Pay you got for work when you were an inmate in a penal institution
  • Interest and dividends
  • Pensions or annuities
  • Social Security
  • Unemployment benefits
  • Alimony
  • Child support
See Chart Below for Tax Year 2021 EITC income limitations:

See Chart Below for Tax Year 2021 Max EITC benefit amount based on Income and # of children:

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