Is the Child Tax Credit new?
No, the Child Tax Credit is not new, but it has been increased and changed. Originally, the Child Tax Credit was a refundable credit up to $2,000 per child UNDER 17 years old. This amount is phased out or lowered for Married Filing Jointly Adjusted Gross Income of $400,000+ and all other filing status of $200,000+.
The update has made the refundable credit up to $3,000 for children between the ages of 6 and 17 years old and up to $3,600 for children UNDER 6 years old as of December 31, 2021. These amounts are phased out or lowered for Married Filing Jointly Adjusted Gross Income of $150,000+, Heads of Household of $112,500+, and all other status of $75,000+.
Will I be getting monthly payments for my kids?
Yes, you can OR you can opt out. The monthly payments will be advance payments of the Child Tax Credit and will be automatically sent to you, based on your 2020 tax return filed, starting in July 2021 and going through December 2021. You will also have an option to opt out of these payments and just receive the credit on your 2021 tax return; the IRS website will shortly be posting a link to be able to opt out.
How much will my monthly payment be?
If you have children between the ages of 6 and 17 years old, you could be getting up to $250 per child in this age range monthly. If you have children UNDER 6 years old, you could be getting up to $300 per child in this age range monthly.
How will the Advance Child Tax Credit Payments effect my 2021 tax return?
If you choose to receive the advance payments, please be mindful that these are estimated ADVANCED payments on the Child Tax Credit. Therefore, if your tax situation has changed, you may have received more than you were entitled. Also, you should expect a smaller refund than you may normally receive since you normally receive this credit in total at year end, but if you receive the payments monthly you are already receiving what you would normally receive in your refund from the Child Tax Credit. If you use the IRS portal and opt out of receiving the monthly payments, you will still be able to get the Child Tax Credit in your year end refund (or lower your tax liability) when you go to file your 2021 tax return.
What if I alternate claiming my child with the other parent?
The IRS will be basing the Advance Child Tax Credit payments on the 2020 tax returns. So, whoever claimed the child in 2020 will be receiving the advance payments. However, the payments will be reconciled on your 2021 tax return and repayment may be an issue. Along with being able to opt-out in the portal to be released, you will also be able to update your tax situation to ensure you receive accurate payments. If you didn’t claim your child in 2020, but you will be in 2021, you will be able to claim the Child Tax Credit with your refund (or lower your tax liability) when you go to file your 2021 tax return. It is highly recommended you speak with your family law attorney to discuss this as well if you are concerned about the other party and the credit.
What if I had a new baby in 2021?
When the IRS portal is open, you will be able to enter new tax related items to ensure you receive the advance payment accurately. When you go to file your 2021 tax return, you will also be able to see the Child Tax Credit in your refund (or lower your tax liability).
What if I don’t work or have earned income?
The Child Tax Credit is a fully refundable credit that does not require earned income, so you can still file and claim the credit.
For more information:
You can visit the IRS or send me an email at Amanda@StickelTax.com.
Advance Child Tax Credit Payments in 2021 | Internal Revenue Service (irs.gov)