Some 36 million families are eligible for advance payments of enhanced child tax credits for 2021, and the Internal Revenue Service has launched two new online tools to help taxpayers navigate this tax law change. There’s a Child Tax Credit Eligibility Assistant tool, and a child Tax Credit Update Portal. These two tools follow the Non-Filer Sign-Up Tool launched earlier this month.
Normally you get the Child Tax Credit when you file your tax return (you’d get the 2021 credit in the spring of 2022 when you file your 2021 tax return). But the American Rescue Act both increased the tax credit dollar amount, and included a provision to make half of the credit available as advance payments on a monthly basis starting July 15—for 2021. 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).
The first new tool, the Child Tax Credit Eligibility Assistant, helps taxpayers figure out whether they qualify for the advance payments. If you determine you’re eligible, you would either file a 2020 income tax return or sign up using the Non-filer Sign-Up Tool.
The second new tool, the Child Tax Credit Update Portal, allows taxpayers to verify their eligibility for the payments and to unenroll or opt out of receiving the monthly payments. “The Update Portal is a key piece among the three new tools now available on IRS.gov to help families understand, register for and monitor these payments,” said IRS Commissioner Charles Rettig.
Why wouldn’t you want the advance payments? For one, you might prefer to receive the entire Child Tax Credit when you file your 2021 income tax return next year. You should unenroll if your income in 2021 is too high to qualify you for the credit, if someone else (an ex-spouse or another family member) qualifies to claim the child as a dependent in 2021, or if your main home was outside the U.S. for more than half of the year.
More updates are coming soon. You’ll actually be able to check the status of your payments. In late June, you’ll be able to update bank account information for payments starting in August. In early August, you’ll be able to update your mailing address. Future updates will let you update family status and changes in income.
Did you get a letter from the IRS saying you may be eligible? Watch out for a second round letter that will be a formal notification of the amount you’ll receive.
Most families don’t have to do anything if they want the advance payments. If you filed a 2019 or 2020 federal income tax return, used the non-filer tool in 2020 to register for a stimulus payments, or if you already registered for the advance Child Tax Credit payments using the Non-Filer sign-up tool. That tool, the first of the three Child Tax Credit tools, helps taxpayers who aren’t normally required to file an income tax return to easily register for the Child Tax Credit advance payments. The credit is nonrefundable, meaning you don’t need income to receive it (normally to take advantage of a tax credit you need income that it would offset).
The latest updates, including a link to FAQs, are posted on the IRS website on its Advanced Child Tax Credit Payments In 2021 page.
Further Reading:
Millions Still In Line For Tax Refunds, Stimulus Payments