We have had many questions regarding the Child Tax Credit, the payments for which begin next month. The IRS recently implemented tools which allow one to research whether they are eligible for the advanced credit and to manage their payments. This email will hopefully assist you in answering some of your questions.
The Child Tax Credit is a $1.9 million relief package which was signed by President Biden allowing millions more families to benefit from the credit with the goal of lifting millions of children out of poverty. It raises the size of the credit, for a period of one year, making it fully refundable and calls for periodic payments to be sent out rather than having the credit rolled into regular tax-time refunds.
Am I Eligible?
The first tool implemented by the IRS this week is an eligibility assistant .
You can log onto the IRS website and, by answering a series of questions, determine whether you qualify for the advance credit.
Eligible parents will receive $300 per month for each child under the age of 6 and $250 for each child ages 6 to 17. The payments will begin July 15 and will be paid monthly through the end of the year.
Could I Owe Taxes at the End of the Year Now?
It is great that you are getting money now on child tax credits, but if you get the advance payments on your child credit then you could owe taxes at the end of year. See below if you want to opt out.
What if I Don’t Want Monthly Payments?
A second tool implemented by the IRS this week allows parents to opt out of monthly payments, instead receiving the full credit as a lump sum when they file their tax return next year.
Soon the IRS Child Tax Credit Portal will allow people to access their payment history as well as update their bank account information or mailing address.
Most households are not required to take action since the IRS already has their 2020 or 2019 returns. Roughly 39 million households, covering 88% of children, will start receiving the monthly payments automatically.
As always, if you have any questions, please contact our office.