The 2021 Child Tax Credit payment for every qualifying dependent child as part of the American Rescue Plan Act, 2021 is expected by summer. It maxes out at $3,600 for children 5 and younger and is at $3,000 for children aged between 6 and 17. The payments will be multiple and could even be sent out monthly. For families with children, the windfall will be greater than the $1,400 stimulus check that has been dispatched to a majority of Americans. Here is how to know the rules before they are sent out. But there are additional rules for qualifying for each family.
You Get The $3,600 Child Tax Credit Payment Only If Your Child Is Below 6
The Child Tax Credit payments are much higher than the amount paid out in 2020. The details can be a bit taxing but the details should help you. The check will be maximum for families with children aged 5 and less. So if you have two children under 5 you could get as much as $7,200. For children between 6 and 17, the amount will be a little less at $3,000.
All your payments are dependent on the annual income, as an individual, as head of household, or as couples filing jointly. The Adjusted Gross Income limit for the payment for individuals is $75,000, for a head of household, the maximum amount is $112,500, and for couples filing jointly the maximum is $150,000.
The amount begins to phase out for each $1,000 increase by as much as $50.
So if you meet the income criteria, you get a maximum of $3,600 for each of your children below 6 years. That is $1,600 above the amount claimed on the 2020 tax returns.
The amount includes babies born anytime in 2021. Parents will likely be allowed to update this information on the IRS portal and claim the amount, according to a senior analyst with Tax Foundation, Garrett Watson. They can also file for that amount along with their returns filed in 2022. But the IRS is yet to publish the details.
When Will The Child Tax Credit Payments Start?
Even as the third stimulus check of $1,400 max is processed and sent by the IRS to more than 100 million families, the authorities are also burdened with the task of processing the hundreds of millions of tax returns before the deadline on May 17. Given the load, when will the CTC checks begin going out to families? And are they expected to go out regularly?
The text of the bill has given out the keyword, ‘periodically’ from July to December. This is when the Child Tax Credit will be paid out. But the IRS is yet to clarify the issue and how regular the payments are expected to be.
The scheduled delivery target for the payments was initially set as monthly. But the extra load on the already overburdened IRS, handling both the 2020 tax returns plus the calculation and distribution of millions of stimulus checks. has led to the change to ‘periodically.’ For now, it appears the monthly target might be quite some way off.
The amount expected in this year will be only half of that owed as per the new bill. The other 50% will go out with the tax refunds next year.
How Will I Get My Child Tax Credit Payment From The IRS; Will It Be By Direct Transfer, Debit Card, Or Paper Checks?
The IRS has not confirmed the details. But the payments are expected to be along the lines of the third stimulus checks. The maximum should be from direct transfers to account of tax filers and others whose records are with the IRS. The rest will receive it a bit late through the US postal services by debit cards or paper checks.
Neither is there any clarity on how Social Security recipients would receive their CTC payments. This included people under the SSDI and SSI programs and also veterans and retired railroad workers, the majority of whom get their payment through Direct Express cards.
Could I Opt For A One-Time Payment Of My CTC Instead Of Getting In Periodically?
There is the option of choosing a lump sum method only with your tax filing in 2022. The rule cannot opt for this year. You can give your preference in the online portal. In this case, you would not receive any amount till you file your returns next year.
Do I Still Get The Child Tax Credit Payments If I Do Not File Any Tax Returns?
Yes. You will have to file your tax returns to qualify for the CTC payments for 2021, even if you are a non-filer. You still have a window of more than a month to file your tax returns for 2020 before the extended final date of May 17 set by the IRS. The IRS will base the Child Tax Credit payments on the information gleaned from the 2020 returns. They will not have to take further ‘unnecessary steps,’ clarified Charles Rettig, the IRS commissioner.
Filing for the 2020 returns will also provide the latest information to the IRS if you have any additions to the family after September 2020. So it will help you get the full Child Tax Credit amount that is payable to you.
Are The Irs Portal To Fix Errors Related To CTC Set To Open Anytime Soon?
The online portal is expected to be built only after the tax filings for 2020 end on the deadline of May 17. This portal will help you log in and update all information once it is up and running. For instance, updating any news of an addition to the family will help you qualify for more tax credit payments.
Are There Any Other Child Tax Credit Qualifications That I Need To Know?
There are some additional conditions to claim the CTC check. The child should have lived with you for a period of at least six months in one year. The mixed-status concession does not apply here. Both the parent and the child should be American citizens.
The rules are a bit different regarding married couples with mixed-status citizenship. Even if only one parent has a Social Security number or an ITIN, they will qualify for the Child Tax Credit, according to Joanna Powell, MD at CBIZ. Additionally, the child should possess a Social Security number, an ITIN number will not help in this case. The rule is also applicable for an adopted child.
Will I Have To Return If I Get More Money From The IRS?
The rules for Child Tax Credit are different from those for the Stimulus Check. You will have to return any amount you get extra. This will be calculated in your next return in 2022. So it is better to be correct with the information provided to the IRS before the first of the CTC checks come in. President Biden had expressed his desire to make the CTC payment. But it is still under discussion in Congress. 41 Democratic senators have advocated making certain pandemic reliefs permanent. This includes the Child Tax Credit.