There are thousands of families affected by the global pandemic and suffered financial hardships. Fortunately, to ease the financial stress, the government has begun issuing Child Tax Credit 2021. On Jul. 15, more than 35 million families received their first monthly payment. The child tax credit in 2021 is bigger than ever before. The IRS is sending monthly payments from July to December to all qualifying families. While the credit amount has increased and can help millions of families, the changes won’t help everyone.
Child Tax Credit Changes
The child tax credit changes are complex, and some families will get negatively affected by them. For example, some upper-income families may experience a reduction in their credit, meaning they may not qualify for a large credit if they qualify at all.
This change will also complicate things more when you file your 2021 tax return because if you qualify for less child credit, you will need to pay the difference by reconciling the advance payments. The 2021 child tax credit can be confusing, but don’t fret! We’ve got you covered. We have compiled a list of the most commonly asked questions about the 2021 child tax credit to put your mind at ease.
How much do qualified families get per child each month?
Knowing how much you are receiving in child tax credits between 2021 and 2022 can be confusing for many individuals. This is how the money gets divided:
- Qualifying children under 5: Receive $300 per child for six months totaling $1,800, half the total child tax credit.
- Qualifying children between 6 and 17 years old: Receive $250 per child for six months totaling $1,500.
The IRS determines the child’s eligibility by how old they are on Dec. 31, 2021. So, for example, if your child turns 6 in 2021, the maximum they qualify for is $250 per month. The rest of the child tax credit will get issued with your 2021 tax refund.
Dependents who are 18 years old may qualify to receive $500. Then, dependents who are enrolled full-time in college and between the ages of 19 and 24 can qualify for the same amount. If the parents didn’t get paid in July, adjustments could get made for their August monthly payments to receive a higher amount.
When will the next child tax credit payment be sent?
Expect the next child tax credit payment to get paid out on Sept. 15. Half of the payment will be given to families in monthly installments, and the rest are given with their tax returns next year. The payments, also known as advanced payments, will total $1,800 per child, and the intention is to help parents with their expenses, such as daycare, food, and rent. See the table below for complete child tax credit payment schedule.
CHILD TAX CREDIT PAYMENT SCHEDULE
|Monthly||Maximum payment per child|
aged 5 and younger
|Maximum payment per child|
aged 6 to 17
|July 15: First 2021 check||$300||$250|
|Dec. 15: Last 2021 check||$300||$250|
|April 2022: Second half of payment||$1,800||$1,500|
When is the deadline to unenroll from the child tax credit?
These monthly payments are optional, and most families in the US will qualify, and some won’t. If your household’s financial situation has changed in 2021, consider opting out to avoid owing the IRS when you file your taxes in 2022. Learn when the next deadline for opting out of the child tax credit monthly payments in the table below.
You can unenroll at any time on the IRS Child Tax Credit Update Portal online from now until December. If you think you won’t meet the income requirements, opting out of the payments would benefit you during tax season. The IRS requires that you unenroll on any day before the first Thursday of a new month. Find the deadlines below.
CHILD TAX CREDIT PAYMENT UNENROLLMENT DATES
|Payment month||Unenrollment deadline||Payment date|
|July||June 28||July 15|
|August||Aug. 2||Aug. 13|
|September||Aug. 30||Sept. 15|
|October||Oct. 4||Oct. 15|
|November||Nov. 1||Nov. 15|
|December||Nov. 29||Dec. 15|
If you opted out of receiving the advanced payments, there is no option to reenroll. However, the IRS is currently working on making the option to reenroll available to families who need it. It’s important to note that married couples filing their taxes jointly must unenroll separately, or half payments will still get issued.
What income limits are there for advance child tax credit payments?
Although there is no limit to the number of children you can receive tax credits, how much you receive depends on the household’s income limits. You can qualify for the full amount if you are:
- A single filer that earns less than $75,000 yearly
- Head of a household that earns less than $112,500 yearly
- Married couples that earn less than $150,000 yearly
The amount you receive will phase out for those with higher incomes. Some families above the income limit may still get some of the money, but it won’t be the full payment. For every $1,000 of income above the limit, $50 gets deducted from the child tax credit payments.
How will this year’s advance child tax credit payments affect 2022 taxes?
If you receive the advance payments this year, you will get the other half on next year’s tax return. So, calculate the amount of money you received in 2021 and deduct it from the amount you can claim next year. The IRS will use your 2019 or 2020 tax return to determine your eligibility for the child tax credit. If they find that the advanced payment was an “overpayment,” you will need to pay some or all the money back. There is little flexibility in terms of overpayment rules for the child tax credit. For example, if both parents who are not married receive the child tax credit for the same child, one will have to pay the IRS back.
How can you avoid this tax inconvenience?
Ensure that all information has been updated on the IRS website. The portal will let you update your income and the number of children that are your dependents. Another way to avoid owing the IRS is to unenroll from the advanced payments and wait till 2022 when you file your taxes.
Why are there different IRS advance child tax credit portals?
The IRS launched its child tax credit online portals this summer. The first portal is intended for those not required to file an income tax return, such as low-income families. The Child Tax Credit Eligibility Assistant tool, which is now available in Spanish as well as English, assists families in quickly determining whether they qualify.
Today the Child Tax Credit Update Portal provides family members with an overview of eligibility, payment management, and monthly advance payments. Parents can also update their mailing address and direct deposit information via the portal. It enables families to update other information in the early fall if their circumstances have changed, such as whether a new child arrives or comes in 2021 and does not reflect your tax return for 2020. You can also amend your marital status, income, or dependents to obtain the latest eligibility information.
What if a child tax credit payment is delayed?
Keep in mind that the IRS is aiming for specific payment dates (see above). If you have set up direct deposit with the IRS, you may see a pending payment before the actual closing date. That means you won’t be able to access the money right away, but it’s on its way. Unfortunately, advance credit is not without its flaws. Due to a technical issue in August, approximately 15% of families who received their July payment via direct deposit were mailed paper checks.
If you receive the check by mail, it might take longer for your payment to arrive. The IRS Update Portal can be used to modify your banking information or address if you have enough time and are concerned. If you’re concerned, you can also file an IRS payment trace. For more information on missing payments, please click here.
Can families that don’t file their taxes get monthly checks?
You should receive the child tax credit if you meet the requirements and have filed your 2020 tax returns.
The new IRS tool named the “Non-Filer Sign-up Tool” should be applied by parents that do not file taxes to obtain their money, even if they do not generally need to. This will allow the IRS to know your income level and how many dependents count towards child tax credit advantages in your household. You may also file a tax return to collect the entire payout for your full monthly child tax credit.
Do babies that are born in 2021 qualify for payments this year?
Your newborn will count toward the $3,600 child tax credit payment if you have a baby in 2021. Adopted children who are citizens of the United States may also be eligible. Once that component of the Update Portal is online, you’ll be able to update the IRS on a new dependent.
Do both parents qualify if they have shared custody?
Those parents who shared custody of a child but were not married to each other were entitled to claim money for the same child for the first two stimulus checks. That was only true if they claimed the dependent in alternate years — that is, the child was claimed by one parent on their taxes in even years, while the other parent claimed for the child on their taxes in odd years.
The third check is no longer permitted, and we are told that child tax credits will not function that way. Here’s what we know so far concerning tax credits for children and shared custody.
If the child switches residences this year, the parents must agree on who will claim the child on their taxes this year. Form 8332 must be completed and included with the tax return by the parent who claims the child and receives the advance payments. You can also unenroll from early payments if you do not qualify or prefer to receive the money in one lump sum. Remember that if you are not eligible but receive the money, you may be required to repay the IRS during tax season.