Advance Child Tax Credit Payments in 2021
The advance Child Tax Credit (CTC), as part of the
American Rescue Plan Act, is a refundable tax credit.
The tax credit amounts will increase for many qualifying taxpayers.
Unlike the regular Child Tax Credit, there is
no 2021 taxable income requirement to be eligible to claim the advance child tax credit. The advance Child Tax Credit for qualifying children is a fully refundable credit. As a U.S. Citizen with a U.S. address for at least half of 2021, you could benefit from the credit even if you do not owe taxes or have earned income. Qualified recipients will have the option to receive monthly direct payments or part of the child tax credit from the IRS during 2021 before filing your 2021 Tax Return in 2022.
dependent claimed on a return or child age 17 (as of December 31, 2021) and younger for tax year 2021 would qualify. The Advance CTC will phase out for single filers with income over $75,000, head of household filers over $112,500, and married filing joint over $150,000.
For dependents over 17, the age eligibility guidelines are different as dependents over 17 might also qualify, but the taxpayer will receive less money. The child age is based on their age at the end of the tax year - for Tax Year 2021, that would be as of December 31, 2021. For example, if a 5 year old child turns 6 during 2021 (as of December 31, 2021), that dependent would fall into the age 6-17 bracket. If a 17 year old dependent turns 18 during 2021, then they would not be eligible for the advance tax credit.
If you are not sure if a child qualifies as your dependent on your 2020 or 2021 tax return, use this
Dependent Calculator to find out. See information on what to do when your dependent was claimed incorrectly by another taxpayer e.g. in joint or shared custody situations. Prepare your 2020 and 2021 tax returns on eFile.com and we will help you not only claim your dependent, but get the most out of the enhanced Child Tax Credit if you qualify for it. Child Tax Credit Advance Payment and Amounts
The IRS announced on June 7, 2021 that they have begun issuing letters to taxpayers who may be eligible. Recipients may see IRS Letter 6416-A come in the mail, likely followed by IRS Letter 6416-B or 6147, a second letter closer to July detailing their monthly payments. IRS Letter 6419 will show the full amount which will be used on the 2021 tax return, sent around January 2022.
Common questions relating to the new, enhanced child tax credit:
When will I receive my Child Tax Credit checks?
Can I get money for my kids or dependents older than 17?
How am I going to receive my Child Tax Credit payments?
Do I need to file an income tax return to receive the Child Tax Credit?
Does my newborn baby count for the Child Tax Credit?
Can I get the Child Tax Credit for dependent claimed by an ex-spouse?
How long do the CTC checks last?
Do I have to repay the amount I receive if I get too much?
The IRS is setting up to pay this credit in advance. That is, through monthly payments of potentially $300 for a child under 6 years old and $250 for all qualifying dependents ages 6-17. Parents who claim dependents and qualify for this will be able to receive half of the enhanced Child Tax Credit during the 2021 tax year before claiming the remaining half on their 2021 tax return. There are some guidelines for who can claim the credit as not everyone will be eligible:
Families might be eligible to receive, for each dependent, a
total child tax credit payment of $3,600 for each child claimed under the age of 6. These will be monthly payments issued either via direct deposit or mail on the fifteenth of each month, July 15 - December 15, 2021. The payment for each child or dependent between the age 6 and 17 is $3,000. This enhanced portion of the CTC will be available for single or married filing separate parents with a 2020 tax return AGI (adjusted gross income) of up to $75,000. Those filing head of household can have an AGI up to $112,500. For parents with the filing status married filing jointly, the income limit is an AGI of $150,000 on the 2020 tax return. Learn more about your IRS filing status. These are phaseout periods; for any amount over the limit, 5% of the credit is reduced, or five dollars for every hundred. Note: if your AGI does not qualify you for the credit, you can still claim the normal Child Tax Credit with the higher AGI limits. You will qualify for
full repayment protection if your 2021 income falls under the following AGI limits: $60,000 for married filing joint, $50,000 for head of household, and $40,000 for single. This means that, if your income is below these, you will be fully protected from paying back any excess advance payments of the CTC. This protection phases out until your income reaches the the limits from the first bullet point.
For example, you are a single taxpayer who made $30,000 during 2021 and had claimed two qualifying dependent children on your 2020 tax return. You were given advance payments based on these, but you are only going to claim one qualifying child on your 2021 return. Because your income is below the limit, you will be fully protected from repaying this when you file your 2021 return by receiving up to $2,000 in repayment protection.
traditional child tax credit, which might be partially refundable, the enhanced credit is fully refundable and no longer requires earned income of $2,500. If you do not normally file (i.e. you normally do not have enough earned income), you may be eligible to claim these payments through a tax return or the future CTC portal. Dependents with the age of 18 might qualify for up to $500 of child tax credit. Children or dependents between the ages of 19 and 24 who
attend college full-time might also qualify for up to $500 per dependent. If a child was born during 2021 as a qualifying dependent and they have not been reported to the IRS by July 2021, a taxpayer has the following two options for receiving the enhanced child tax credit payment:
Option A: A taxpayer could use the IRS portal - scheduled to open by July 1, 2021 - and register the 2021 newly born child as a dependent. We do not have all the details on this, so bookmark this page as it will be updated as the information becomes available. See below for more details.
Option B: You could claim the enhanced child tax credit on your 2021 tax return due in 2022 and receive the Child Tax Credit or CTC in a lump sum via your tax refund or reduce your taxes owed. Option B would not enable you to receive monthly payments starting in July 2021; for that, you would have to use Option A. If a child passes away during 2021, the parent or taxpayer who claimed them on the tax return is still eligible to claim the advance payments. If the qualifying child was alive during 2021 and was eligible to be claimed on your return, you can claim the advance payments of the credit for 2021.
The IRS is basing the payments off your 2020 return - if a 2020 return is not available, they will use a 2019 return or a "non-filer return" if available. If you file your 2020 return late - as in, after the payments have begun in July - and doing so changes your payment amount, the IRS will adjust this for the remaining payments.
If you have
filed or e-filed a tax extension which has been accepted, this will delay getting your information to the IRS. The IRS will use your last available return information - potentially 2019 - to issue your payments if you do not update your extension with your income tax return or use the IRS CTC portal when it launches. A dependent can only be claimed once per year, meaning, in the case of separated parents or guardians, only one taxpayer may claim the credit. The dependent must be claimed by the taxpayer who is eligible to claim; if wrongly claimed, the amount may have to be repaid. In general, if you receive an overpayment of the credit (for example, your income changes and you qualify for less than you received) then you will have to repay this via a 2021 tax return. Be as accurate as possible if reporting your information on the IRS portal. If you did not claim a dependent on the 2020 return, you will be able to add the information on the CTC UP to indicate you will be claiming them on the 2021 return.
You will be able to change your method of payment for the enhanced child tax credit payments via the IRS child tax credit portal. See below for more information. The enhanced child tax credit payments are only set to last through 2021, but President Biden has suggested that this may be extended through as long as 2025 as part of the
American Families Plan. IRS Child Tax Credit Portal and Non-filers
The advance Child Tax Credit or CTC payments are scheduled to begin in July 2021 and end by 2022. It is unclear if it will be extended into 2022 and/or future years.
The Internal Revenue Service has launched a site where taxpayers can update their information, non-filers can enroll, and all users can track the enhanced child tax credit. The CTC payments will be made monthly and not in one lump sum payment - though taxpayers can opt to receive just one payment. Taxpayers can use the IRS portal to indicate to the IRS that they wish to opt out or report any changes to their households in 2021. Families without internet service can use a paper form or
visit an IRS office.
Since not all families have sufficient income to require filing a tax return, the IRS has suggested that parents or guardians who do not normally file (e.g. did not file a 2019 and/or 2020 tax return) will be able to simply create an account via the IRS portal and get their credit that way. The IRS portal will also let non-filers and taxpayers who
did file update their children’s custody or dependent claim arrangements - for example, if children have moved since last reported on a tax return or to add newborn babies since the last of any filed tax return.
With this method, a tax return is not needed and the information will still go directly to the IRS so they can begin issuing these payments. If you are a non-filer who is looking to claim this credit, consider using the portal OR
filing a 2020 tax return via eFile.com in order to get your tax information, bank information, dependent data, etc. to the IRS now.
Important: The IRS has created the Child Tax Credit Update Portal or CTC UP which will go through two phases. First, it will be used for taxpayers to opt out/unenroll in the advance payment program. Later, it will be updated with tools for users to get a status of their payments, update their information, and it will also be available in Spanish. Parents or guardians will be able to update their mailing address, banking information, dependent information, marital changes, or a change in income. The page is also where those who do not normally file can get their information to the IRS.
Why would I want to opt out of the advance Child Tax Credit Payments? You may want to not claim these advance payments for a few reasons. Some taxpayers simply like a large check at the end of the year; instead of using the money during the year, take a big check in early 2022 after filing your 2021 return and pay off your debt in a large sum or put a down payment on a new car. Additionally, if you expect your income to increase in 2021 - if you start receiving payments now, but your new income puts you above the phase-out threshold - you may have to pay this back. If you expect your dependent to be claimed on the 2021 return - maybe by an ex spouse as part of a divorce agreement and you alternate years - then you would want to opt out if you claimed your dependent this year. You would want to opt out if you no longer live in the U.S. for more than half of 2021. If you reported a U.S. address on your 2020 return, you will want to opt out if you anticipate establishing a foreign residency in 2021.
In summary, make sure your 2020 tax return is filed or e-Filed with the IRS as soon as possible. You can
e-File your 2020 tax return(s) until October 15, 2021 here at eFile.com. After then, they will only be able to be filed by mail. Get your information to the IRS so you can start receiving your due payments.
If you who do not used the IRS portal to claim your advance Child Tax Credit benefits, you can claim the credit when you prepare and e-File your 2021 tax return in 2022 here on eFile.com.
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