There are a lot of questions swirling around about the advance Child Tax Credit, so we wanted to answer a few of them here. If you have further questions, or need help deciding what to do, feel free to reach out to us for input and assistance too.
What are advance Child Tax Credit payments?
The enhanced child tax credit was part of the American Rescue Plan signed into law by President Biden in March. Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. If the IRS has processed your 2020 tax return or 2019 tax return, these monthly payments will be made starting in July and through December 2021, based on the information contained in that return.
Who qualifies to receive them?
The full credit is available to all children ages 17 and under in families with 2020 or 2019 adjusted gross income of less than $75,000 for single parents and $150,000 for a married couple filing jointly. The advance payments end for individuals earning $95,000 and married couples filing jointly making $170,000, though they’d still be eligible for the regular child tax credit.
How much are the credits?
The total child tax credit for the 2021 tax year is up to $3000 for each qualifying child ages 6-17 and $3600 for children under 6. The advance child tax credit is a monthly payment of $250 for each child ages 6-17 and $300 for children under 6. These payments are an advance on the credit you plan to claim on your 2021 taxes. For example, if you have one 8-year-old qualifying child, you will receive $250 per month from July through December of 2021 for a total of $1500. That means that when you file your 2021 taxes next year, you will have half of the normal amount of child tax credit, the remaining $1500 in the case of this example.
What do I need to do to receive the advance payments?
In most cases, nothing. If you are eligible based on your 2019 or 2020 tax return, you will receive the payments automatically without needing to take any action. If you provided information about your bank account or received a refund via direct deposit, you should start seeing the payments in that same account starting on July 15 and continuing monthly until the end of 2021.
What if I wasn’t required to file taxes in 2019 or 2020; can I still receive the advance payments?
The IRS and the Treasury have created an online tool for non-filers that can be found here. You’ll be asked to enter your name, contact information, date of birth, social security numbers for yourself and your dependents. From there, the IRS will determine. Your eligibility and issue advance payments based on the information provided.
Do I have to receive these payments, or can I opt out?
In some cases, families may prefer to wait and claim their child tax credits when they file their 2021 tax returns rather than receive them in smaller sums during the second half of 2021. This is particularly true for those that tend to owe money to the IRS when they file their taxes and need this credit to offset the money they owe. Others who typically receive a large refund that they depend on to pay off bills or make large purchases may also choose to opt out.
If I want to opt out, how do I do so?
The IRS has said that they will add an option to opt out to the Child Tax Credit Update Portal (CTC UP) by July 1. We will post information on its location and how it works as soon as it goes live.
The IRS has a site that include additional frequently asked questions that you can access here. If you have questions for us, don’t hesitate to reach out.