The expanded CTC will start July 15 and will bring in up to $300 per child, announced the IRS and the US Treasury Department. It comes immediately after the third stimulus check and is also within the Rescue Plan. This payment is a monthly advance on the 2021 return and will last through December 2021.
These payments will be a big boost to families with children and will help bring 88% of families with children out of the clutches of poverty.
But there is a certain qualification for the payments, with eligibility for the CTC linked to the income of the families.
The Amount You Can Expect From The CTC
The CTC has been broadly divided into two segments. Children below 6 will contribute a total of $3,600 each to the total amount received by the families. For every child above 6 years and below 18, the total amount will be $3,000.
The amount will be paid in two installments. The first part is set to start on July 15 and will contribute up to $300 per month through December 2021. The balance of 50% of the amount will be part of the tax refunds in the tax season next year.
Will My Income Be Calculated In A Way Similar To The Stimulus Check?
The child tax credit payment each family will receive will depend on the AGI, as with the stimulus check payments.
Individuals with Adjusted Gross Income of $75,000 and less will receive the maximum amount of either $3,600 or $3,000 for each child depending on the age. For married couples, an AGI of $150,000 or less will get them the complete amount.
But if the AGI crosses the limit, your CTC will go decrease at the rate of $50 for each additional income of $1,000.
Individuals and couples not qualifying for the full amount will still get the $2,000 for each child, equal to the credit available for the 2020 returns. But for individuals, the AGI has to be less than $200,000. For married couples filing jointly, the AGI has to be less than $400,000.
Your Child Tax Credit Will Be Based On Your Latest Return
The authorities will determine your child tax credit on your 2020 returns. If you are yet to file it, it will calculate the amount on your 2019 returns.
As you might lose out if you have not entered the birth of a baby in 2020, or had a cut in earnings, the IRS has enabled a tool online for people to keep posted any information. It will go online by July, though the exact date and details are yet to be confirmed by the IRS.
What Are The Criteria For The Child Tax Credit Payment?
Your child has to be a citizen of the US, national or permanent resident to qualify for the CTC. They must also have a Social Security number.
The child should also be mentioned on your last tax return as a dependent.
The Rules For Unmarried And Divorced Parents
The parent who has custody will generally get the credit. Parents can also claim alternate turns though. But the issue gets complicated for advance payments and will need further clarification from the IRS.
As the IRS has based the monthly advance payment on the 2020 returns, the parent claiming the child in that year will get the credit. But it will lead to a parent claiming the credit for two years back-to-back.
It is expected that the IRS will advise parents to update the information so that the correct person receives the payment.
Returning Any Amount Credited Erroneously
You are expected to return any payment that has been sent to you by mistake. But there is some protection for parents who earn under $40,000. The same goes for married couples filing jointly and earning under $60,000. A ‘Safe Harbor’ protection under the American Rescue Plan allows them the luxury of not returning any overpayment along with their 2021 returns filed in 2022.
What About The Baby Born In 2021?
Yes, babies born in 2021 will qualify for the CTC. But you have to update that information as this matter will not be reflected in your 2020 returns.
The online tool is set to start on July 1 by the IRS will enable you to fill in this information and receive the monthly CTC for your child.
If you miss out on this stimulus check by any chance, you can at all times claim the full credit against your 2021 returns.
The Rules For Non-Filers
This issue cropped up when the authorities gave out the stimulus checks in 2020 and 2021. To overcome this issue, it had uploaded the non-filers tool. It allowed citizens to give information to the IRS that is required to send the stimulus checks. But the tool was discontinued for the third stimulus check. People had to file their 2020 returns to update information including bank details, home address, and the change in the number of dependents.
Though the extended deadline for filing the 2020 tax returns has passed, you can still apply for an extension and file your returns. The sooner you file your returns, the quicker will the details of your stimulus check get updated in your IRS records. You can also use the IRS online tool that will be available in July.
Will There Be Any Extension Of The Child Tax Credit?
There has not been any update on this issue from the IRS. The CTC has only been declared for the 2021 filing year. But several Democrats plan to make this provision permanent. President Biden’s American Families Plan wants to extend the present provision till 2025.
What Does Fully Refundable Mean In The CTC Context?
You needed to earn no less than $2,500 to qualify for the complete credit. But for the tax year 2020, you do not have to declare any income to be eligible. So if you are not liable for any tax, you will get the full amount of the CTC as a refund.
Can I Collect The CTC As A Total Refund?
You can update your preference in the online tool, set to be available in July. You can then claim the credit against your tax return filed next year.