Learn More About the Advance Child Tax Credit
Heya folks! This summer, the IRS will help families by sending out advance payments of the Advance Child Tax Credit. We’re here to share the news and let you know how to claim your payments.
If you are still reading this, then you probably have a qualifying dependent that makes you eligible for an Advance Child Tax Credit. If you provided your direct deposit information on your 2020 tax return, then you may want to check your bank account, as you possibly received the first installment of the credit today. If not, then it’s possible a paper check is coming to you, or the IRS made an error.
Upwards of 36 million families will receive monthly payments from the IRS relating to the newly expanded Child Tax Credit in a new program designed to get funds in taxpayers’ hands sooner. As part of the American Rescue Plan Act enacted in March 2021, the child tax credit has some upgrades…
The Old: $2,000 per eligible child under age 17 on December 31. Included as a credit on your tax return.
- $3,000 per eligible child under age 18. $3,600 to children under age 6 on December 31.
- 50% advance, 50% included as a credit on your tax return.
Why This Is Important
The IRS is calculating your expected 2021 Child Tax Credit and will begin paying half that amount in six installments beginning on July 15, 2021, and running through December 15, 2021. You likely have received a notice from the IRS stating that this is coming. If you do nothing, these payments will begin automatically based on the information in your most recently filed tax return. If you would rather opt-out of receiving the monthly payments, you must sign up for an IRS portal and opt-out of these payments with them directly.
Important: This advance, unlike the federal stimulus checks, will need to be repaid if you are no longer eligible to receive it upon filing your 2021 tax return. It is also important to note that the monthly advance of the child tax credit is a significant change. The choice to have the credit advanced will affect your refund or amount due when you file your return. You should elect to opt-out of these payments if any of the following scenarios applies to you:
- If you have a child that turned 18 during 2021 – The IRS shouldn’t be sending payments your way but if they do then you will have to pay them back.
- If you alternate claiming dependency with a divorced or separated parent
- If your expected income increases above $150,000
How To Opt-Out
If you do not wish to receive the monthly payments from the IRS (this is just an advance, you will still receive the credit on your tax return if you are eligible) you need to log in to the IRS’s Child Tax Credit Update Portal. You will need to verify your identity through their encrypted portal and create an account with the IRS to opt-out.
If you are reading this post, and all you do is ignore the advice, you will just receive your advance credit for the next 5 months and if you aren’t ultimately eligible, you will have to pay the money back to the IRS.
For those who are eligible but are not receiving payments, there’s not much we can do. The IRS has promised they will put out an updated portal in relation to this credit, but there have been zero movements on that front and we suspect it will be a while, given the backlog at the IRS.
Also, if you have trouble creating an IRS portal, there’s not much we can do to help you, given the multi-factor authentication that exists. The taxpayer is the only one who can make these changes. We cannot fix this for the IRS. Eventually, they will fix the bugs that exist, but until then, just be prepared to be incredibly frustrated with their systems and sitting on hold on the phone for hours on end, if you even get through in the first place.
Contact the Nerds
Let us help you. With any tax law change, it is important to revisit your full financial roadmap. As always, planning ahead can help you maximize your family’s situation and position you for greater success. If you have any questions, submit a form, shoot us an email at firstname.lastname@example.org, or call your Nerd today!