Advanced Child Tax Credit

This week, changes to the Child Tax Credit will help families receive advanced payments. Beginning 15 July, the IRS will pay half the total credit amount in advanced monthly payments directly to their bank accounts. The expanded child tax credit is only for 2021. 

Image by Bessi from Pixabay

To qualify for advance Child Tax Credit payments, you — and your spouse, if you filed a joint return — must have:

  • Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
  • Given us your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and
  • A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
  • Made less than certain income limits.

The IRS uses information you provided earlier to determine if you qualify and automatically enroll you for advance payments. You do not need to take any additional action to get advance payments.

Here are some key facts about how it works. Source PBS https://www.kpbs.org/news/2021/jul/15/the-expanded-child-tax-credit-is-here-heres-what/

How much will my family get?

For every child under the age of 6, families will get up to $3,600 under the expansion, or $300 per month. For every child ages 6-17, the amount is $3,000, or $250 per month. This is a significant increase from past years when the credit was $2,000 per child, ages 0-16.

The amount starts phasing out for families with higher incomes, above $150,000 for married couples filing jointly, or $112,500 for single parents who file as head of household. There are a number of online calculators you can use to see how much you can expect to get.

Why is this money going out now?

What’s being sent out this week is known as an advance child tax credit payment. In the past, families eligible for the child tax credit would have gotten it as a one-time lump sum when they filed their taxes. Now, half of the credit will be disbursed over six months, with a payment made on or around the 15th of every month from now until December. You get the second half of the credit when you file your taxes.

Do I need to sign up to get the money?

If you file federal taxes, you should automatically get the monthly payments. If you don’t file taxes, you need to register on a website set up by the IRS. People who don’t file taxes but received stimulus checks in the pandemic should automatically receive the payments.

Can I opt out of the advance payments and just get the whole credit next spring when I file my taxes?

Yes. The IRS has created a website where you can manage your payments. You need to set up an account and verify your identity before you can stop the monthly payments.

By opting out, you are not turning down the credit. You are just delaying when you get it. This may be a good option for people who are accustomed to getting a sizable credit on their tax bill in the spring and count on that to offset taxes due or to make a big purchase.

What if my child turns 18 in 2021? What if I have a new baby this fall?

The expanded child tax credit covers children from birth to 17. If your child turns 18 in 2021, he or she will no longer be eligible. However, because the advance payments are based on earlier tax filings, you may still receive money for a child who is ineligible. Most people will have to pay that money back. The IRS does have a repayment protection program for lower-income earners.

If you have a baby anytime in 2021, that baby is eligible for the credit. The IRS says you will be able to make changes to your dependents, marital status and income on its website by late summer.

This has been talked about as the most substantial one-year reduction in child poverty in history. Is that true?

Columbia University’s Center on Poverty and Social Policy estimated that the expanded child tax credit and other measures in the American Rescue Plan could lift 5 million children out of poverty, cutting child poverty in half in the U.S. That’s not only because the amount of the credit is higher this year; it’s also because in the past, families who earned very little were not eligible for the full amount.

The Treasury Department estimates that 26 million children in low-income families who would have received less than the full credit under the previous rules will now get the full, expanded credit.

But for this to happen, families who aren’t already registered with the IRS need to do so, and there is concern that many have not. Children need a Social Security number to be eligible, and so families with mixed immigration status may be hesitant to register, says Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality.

Stay in the Know

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