Child Tax Credits

Millions of families will start to receive monthly payments from the IRS following the enactment of President Biden’s coronavirus relief law that included an expansion of the child tax credit. The $1.9 trillion relief measure from March increases the credit amount for 2021 and directs the IRS to make periodic advance payments of the credit through the end of the year, so that families receive funds in installments rather than in a lump sum when they file their tax returns in 2022.

Here’s what you need to know about the monthly child tax credit payments:

Monthly payments will be up to $300 per child.

The coronavirus relief law increased the maximum amount of the child tax credit for 2021 from $2,000 for children under 17 to $3,600 for children under 6 and $3,000 for children ages 6 through 17. Married couples with income of up to $150,000 and single parents that use the head-of-household filing status with income of up to $112,500 are eligible for the full increased credit amounts.

The credit will be fully available to the lowest income households, and the IRS has been directed to set up a program on advanced payments. The agency will make payments on or near the 15th of each month through the end of 2021. The monthly payments will be as much as $300 for children under 6 and $250 for older children.

Families will typically receive half their credit amount for 2021 in the form of the monthly payments this year, and they will receive the rest when they file their tax returns next year. The Internal Revenue Service just rolled out the Child Tax Credit Eligibility Assistant. This online tool allows families to answer a series of questions to find out if they might receive money soon.

Some low-income families need to register for the monthly payments.

About 39 million households, covering almost 90 percent of children in the United States, will receive monthly payments automatically.

Families slated to receive automatic payments include those that filed 2019 or 2020 tax returns and families that used the IRS’s non-filer tool for stimulus payments last year. Most households receiving automatic payments will get them via direct deposit.

However, some non-filer households eligible for the expanded child tax credit will need to take action to get the monthly payments. This group includes households with very low incomes that typically are not required to file tax returns.

For more information and to access the Non-filer Sign-up Tool, go to:

Recipients can use an IRS web tool to opt-out of monthly payments.

In addition to the IRS web tool for non-filers, the agency has created a separate online portal that people can use to opt-out of the monthly payments and update their bank information. The IRS also just rolled out its Child Tax Credit Update Portal that allows families to verify their eligibility for the payments and, if they want, opt out from receiving the monthly payments. Instead, a taxpayer would receive a lump sum, if they qualify, when they file their tax return next year. There are a number of reasons why people may want to receive their full credit amount when they file their 2021 tax returns, rather than receiving monthly payments this year.

Taxpayers who expect to be eligible for smaller credit amounts based on their 2021 income than their 2020 income, such as if their income increased to above the thresholds this year, may want to unenroll from the monthly payments to avoid having to pay back funds to the IRS.

Some taxpayers who are not seeing a significant increase in their income this year may also want to opt-out to prevent the monthly payments from resulting in smaller refunds or balances due to the IRS next year.

The IRS said it plans to update the tool in the future, so that people will be able to change their address, provide new information about their dependents and re-enroll in the monthly payments if they had previously opted out. The agency also expects to make the portal available in Spanish.

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