If you have dependents, you may have received some money from the IRS recently. This money is part of the Advanced Child Tax Credit, designed to help taxpayers support their families. The first of six payments was sent on July 15th; the second is scheduled for August 13th.
It is important to understand that these payments are very different from the economic impact payments sent earlier. The Advanced Child Tax Credit is not a stimulus payment but a partial advance of benefits. Using the benefit now will reduce your benefit later.
Individuals with qualifying dependents have an opportunity to claim a tax credit when filing taxes. This credit is a reduction of tax liability and is fully refundable in 2021.
Those who have received an advance of the credit will not have the entire credit available to them when filing in 2022. They should be financially prepared for a higher tax liability (or lower tax return) than in years past.
