Tax Breaks

Your Final Child Tax Credit Payment Can Be Adjusted for Income Changes (But There's a Deadline)

If your income has gone up or down this year, consider adjusting your final monthly child tax credit payment. But you need to act soon.

Did you know that you can adjust the amount of your final child tax credit payment if your income went up or down this year? However, you'll have to act soon if you want to change the amount of your December 15 payment. The deadline for notifying the IRS of a change in income is midnight Eastern Time on November 29 if you want your last payment to be higher or lower. If you're married, an income update made by one spouse will apply to both spouses, which could affect the final monthly payment for both of you.

Why Your Income Matters

The amount of each monthly child tax credit payment is generally based on information taken from your 2020 federal income tax return, and one of the key pieces of information is your income from last year. If your 2021 income is substantially higher or lower than your 2020 income, that can mean you're getting too much or too little each month from the IRS.

For example, suppose your 2020 income was slightly over the applicable 2021 child tax credit phase-out threshold. That means – based on your 2020 tax return – the IRS is likely to reduce your monthly child tax credit payments. However, if you were out of work for part of 2021 and your income is lower this year, your 2021 child tax credit might not be affected by the phase-out rules. In this case, letting the IRS know that your 2021 income is lower could result in a higher monthly payment in December. (Note that, if you're already receiving the maximum payment amount, a drop in income won't result in a larger payment.)

On the other hand, if your income is substantially higher in 2021 than it was in 2020, you may want to have your December 15 child tax credit payment lowered (or even eliminated by opting out) – especially if you're receiving the maximum monthly payment but expect to qualify for less than the full credit for 2021. If the total amount of your monthly payments exceeds the 2021 child tax credit that you're entitled to claim, you may have to pay back the excess amount when you file your 2021 return. In this case, reporting the higher income amount now will allow the IRS to adjust your final payment accordingly.

How to Report a Change in Income

To report a change in income, go to the Child Tax Credit Update Portal on the IRS's website (you'll need either an existing IRS account or an ID.me account to access the portal). You can only use the portal to update your income if you're already eligible for and receiving monthly child tax credit payments based on your 2020 tax return. If you filed a joint tax return for the 2020 tax year, you can only update your income if you plan to file a joint return for 2021 with the same spouse. Once you complete the income update, the portal will acknowledge that a change was made. However, the change won't be displayed.

Also note that IRS representatives can't process income changes over the phone or at Taxpayer Assistance Centers. They also won't be able to confirm that an income update was made. So, stick to the portal and don't waste your time trying to call the IRS to make a change or verify that one has been made.

For complete coverage of the 2021 child tax credit, including monthly payments, see Child Tax Credit 2021: How Much Will I Get? When Will Monthly Payments Arrive? And Other FAQs.

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