Many families are now receiving advance monthly payments from the Child Tax Credit for the rest of this year. These payments from the IRS are half the estimated amount that a family may claim on their 2021 tax return next year, based on prior year tax information.
These changes are part of the American Rescue Plan, which increased the Child Tax Credit during 2021 and raised the age limit from 16 to 17. Income limits apply.
The IRS is offering an option to unenroll for those who don’t want to receive the credit in advance. This may apply to people who have gotten a pay increase, as well as to those who claimed dependents in previous years, but who will not claim a dependent this tax year. It also may apply to those whose children may “age out” of an eligibility bracket during the year. For example, a child who turns 18 no longer qualifies for the credit. Children younger than 5 qualify for more money than children 6 and up, so that is another birthday to note. Also, someone could choose to unenroll simply in order to claim the full credit when filing the 2021 return next tax season.
Those who have added a dependent this year through birth or adoption may wish to enroll. Children in low-income families that normally don’t file a tax return may be eligible if the families submit information through the IRS’s non-filer portal.
The IRS provides links at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021 that help people do several things:
Manage payments, including unenrolling and updating bank account information,
Check if they’re eligible, and
Help those who don’t normally file a return to enter information in order to get the Child Tax Credit.
The IRS will send you a letter in January 2022 called Letter 6419 that you will use when you file your 2021 tax return. That letter can help you determine if you received overpayment and might need to repay, or if you are due additional child tax credit money upon filing your taxes. Lower-income families may not have to pay back overpayments because of the “safe harbor” rule. Those who have questions should review the IRS website or contact a trusted tax professional.
IRS. (July 30, 2021) 2021 Child Tax Credit and Advance Child Tax Credit Payments — Topic A: General Information. Retrieved Aug. 9, 2021, from https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-a-general-information#a16.
The White House. The Child Tax Credit. Retrieved Aug. 9, 2021 from https://www.whitehouse.gov/child-tax-credit/.
Kiplinger. July 16, 2021. Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments. Retrieved Aug. 9, 2021 from https://www.kiplinger.com/taxes/603130/pay-back-your-monthly-child-tax-credit-payments.
Rachel L. Hance is the Logan County Extension Agent for Family & Consumer Sciences.
Source: Kelly May, Senior Extension Associate for Family Finance and Resource Management