The Internal Revenue Service today updated its Child Tax Credit information page with FAQs and a new online tool to reach low-income people who don’t normally file tax returns. The American Rescue Act’s enhanced child tax credit basically means that 36 million families with kids get more money in their pockets earlier this year—instead of having to wait to get the credit when they file their 2021 tax return in 2022.
The expanded credit provides parents with a $3,000 credit for every child age 6 to 17, and $3,600 for every child under age 6 (up from $2,000 per dependent child up to age 16). Everyone eligible for a Child Tax Credit of any size is eligible for the advance payments, according to Elaine Maag, principal research associate with The Urban Institute’s Tax Policy Center.
The IRS will pay half the total credit amount in advance monthly payments, and you claim the other half when you file your 2021 income tax return. The first of the six payments is scheduled for July 15, with the following payments on August 13, September 15, October 15, November 15 and December 15. If you’re eligible based on your 2019 or 2020 tax return, the IRS will automatically send you the payments.
IRS letters already went out (Letter 6416 or Letter 6416-A) notifying taxpayers they may be eligible. If you got one of these general letters, you appear to qualify based on your return information. Another round of letters (Letter 6417, look on the bottom right corner of the letter for the number) that really matter are due out “soon” according to an IRS spokesperson. These letters will formally notify families of the amount they are going to receive.
What if your eligibility has changed? The IRS says it will have an online portal where taxpayers will be able to update information, such as a change in income, or noting the birth or adoption of a child. You’ll also be able to update your mailing address or bank account information. You’ll also be able to unenroll from receiving advance payments. That can make sense if you’re self-employed and make estimated tax payments.
Warning: You’ll have to reconcile your advance child tax credit advance payment when you file your 2021 tax return in 2022. The total amount of advance Child Tax Credit payments that you receive during 2021 is based on the IRS’s estimate of your 2021 Child Tax Credit. If the total is greater than the Child Tax Credit amount that you are allowed to claim on your 2021 tax return, you may have to repay the excess amount on your 2021 tax return during the 2022 tax filing season.
How can non-filers get advance payments? The new non-filer Sign-up tool is an update of last year’s IRS Non-filer. tool that was designed to let people get stimulus payments even if they didn’t have to file a tax return. It lets people provide the IRS with basic information—name, address, and Social Security number—so the IRS can calculate and issue their Advance Child Tax Credit payments. You’ll also plug in information about children age 17 or under, other dependents, and direct deposit information. It’s for people who didn’t file a tax return for tax years 2019 or 2020 and who didn’t use the IRS economic impact payment non-filer tool.
The latest updates, including a link to the FAQs, are posted on the IRS website on its Advanced Child Tax Credit Payments in 2021 page.