The IRS announced that crucial changes have been made to the Child Tax Credit (CTC) under the American Rescue Plan of 2021 (ARPA) that will help many families receive advance payments, beginning as soon as this summer. ARPA expands the CTC for tax year 2021 only.
The IRS has started sending letters to more than 36 million American families who, based on either their 2019 or 2020 federal income tax return, may be eligible to receive monthly CTC payments.
Eligible families will begin receiving advance payments, either by direct deposit or check. The payment will be up to $300 per month for each qualifying child under age six and up to $250 per month for each qualifying child ages six to 17.
The IRS will issue advance CTC payments on the following dates:
- July 15
- August 13
- September 15
- October 15
- November 15
- December 15
The expanded credit means:
- The credit amounts will increase for many taxpayers
- The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes
- The credit will include children who turn age 17 in 2021
- Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return
For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.
The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
The IRS encourages parents receiving the CTC to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits, such as the Earned Income Tax Credit (EITC).
Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.
Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments.
To learn more or receive assistance filing your 2020 tax return, contact your CTBK service team today.