A detailed guide about Child Tax Credit 2021

Parents struggling with the financial obstacles in raising their children get thrilled when they receive their first payment for the child tax credit. With these funds, hope for survival beyond poverty illuminates every time that keeps the family alive. Families who received $300 as their Child Tax Credit 2021 in July this year will receive the amount every month for the purpose, while parents expecting to receive their first payment after July, can expect to receive even more than $300 a month.

Child Tax Credit 2021The IRS has given out payments for Child Tax Credit 2021 on Aug 13 as the second round of payments. The Child Tax Credit 2021 payments are to be distributed among almost 36 million families across the United States. According to the prescribed schedule, these payments will be sent to families each month throughout the year-end. This may depict the possibility that the payments would not continue to be sent by the IRS after 2021. However, many Congressional Democrats and even President Biden himself want to extend the period of Child Tax Credit payments. So, there’s a clear hope for the payments receiving families to continue receiving the payments after 2021 as the IRS will be sending monthly payments in 2022 as well.

Keep reading the guide to know what Child Tax Credit 2021 is and what amendments the IRS has compiled in the 2021 update.

What is child tax credit 2021?

The CTC – Child Tax credit provides a helping hand to the financially struggling parents to compensate for the cost of upbringing their children. Nearly every family will be getting CTC this year, which includes the families that do not earn monthly income and have not filed their Tax Returns.

Every CTC 2021 eligible household will receive $3,600 as an offset cost for every child aged between 0-5, and $3000 for every child aged 6-17. Child Tax Credit is not a debt on families, however, they will receive half of the new Tax credit between the months of July till December this year and the rest in 2022, when they become eligible to file tax returns.

Updates from CTC 2021

The Child Tax Credit 2021 criteria have been amended and came up with much different standards for the eligibility of households. IRS has made 6 adjustments in Child Tax Credit 2021, which are:

Tax credit amount increased

IRS has maximized the Tax credit amount to $3000 for each child under 17 and for kids under 6 it’s raised to $3,600 from the CTC amount of $2000 from the year 2020.

Makes the credit refundable

From the update, even if you did not file your tax returns, you can receive the CTC refund.

IRS removed the minimum income eligibility requirement

Even if you don’t earn or have zero income, you would still be able to claim your CTC funds.

Raised age limit

For CTC 2020, the child has to be younger than 19 or if the child is a student, then he or she should be younger than 24. In Child Tax Credit 2021, the qualifying requirements have been raised to children under 17 who can qualify for receiving the tax credit.

Providing the Payments in advance

If you received the CTC payments for 2021 for the tax returns you filed in 2020, you can begin receiving half of the new Tax credit for 2021. With this, the requirement of filing complete tax returns for 2021 (which you will file next year in 2022) and then start receiving Tax credit is dissolved. IRS is committed to sending you the half payments for the Tax credit you will file the next year between July and December 2021 in advance.

The phase-out rate has been lowered

Once you receive your first CTC payment, it will start decreasing gradually which starts from $75,000. For the head of the house, it starts decreasing from $112,500 and for married couples $150,000.

These amendments are made temporarily for the tax returns filing for the year 2021 in 2022. However, it can be restored to the previous version at any time.

What makes you eligible to receive CTC?

To claim your Child Tax Credit 2021, you should be qualified for three main criteria:

Income:

There are no certain requirements for receiving Child Tax Credit 2021, however, the payment starts decreasing when an unmarried person makes $75,000, Married $150,000, and for heads $112,500. Every $1000 above from these incomes will decrease the payments up to $50 on the Child Tax Credit 2021 amount.

Taxpayer ID number:

Your spouse and you need to show a Social Security card number or prove the identity by showing the individual Taxpayer Identification Number (ITIN).

Qualifying Child:

The number of children that you have claimed to receive CTC for, must be your qualifying children. Furthermore, they have to pass the following qualifying child test beforehand to qualify for the CTC payments.

Relationship Eligibility Requirements

The qualifying child must be in a relationship with you as a child, grandchild, adopted/stepchild, younger/Step sibling, or any other descendent, and a foster child that you have received from a government agency.

If you are subjected to report as a child’s guardian, a government agency will place the child with you until further notice. These children are considered Foster children.

The qualifying age for CTC payments for children is under 17 till December 31st, 2021.

Residency Requirements

The qualifying child must live with you or with your family for more than six months in the United States. Six-month time duration doesn’t have to be in a consecutive period. For non-custodial parents, there’s an exception to claim a child as dependent from the custodial parents. A waiver form is required from the custodial parents for this purpose.

Taxpayer ID

Children claimed for Child Tax Credit 2021 must have a valid Social Security card number.

Support & Dependency

The child in CTC 2021, must not provide more than half of his support and should be considered a dependent for tax-paying purposes.

It is also important to note here if you are divorced or separated legally with a child, you or your ex-spouse cannot file a separate CTC claim for the same child. For instance, if you are claiming your child for tax credits this year, you are obligated to claim the child for EITC Earned Income Tax credit the same year provided if you are eligible for both of them.

How to receive advance payments for Child Tax Credit 2021

If you fall eligible for the following requirements, you don’t need to do anything to receive Child Tax Credit 2021.

If you have:

  • Filed 2019-2020 tax returns. Your tax returns information will make you eligible to get advance payments in terms of Child Tax Credit, even if you don’t claim for them.
  • If you have successfully filled the information on IRS non-filer tool 2020, which is the one you may have used to get your stimulus check payments

Since IRS started sending notices to the eligible families about advance payments in June 2021, therefore, IRS will send you your monthly qualifying payment reviewing your income details for each child after July 15th to December 15th, 2021.

Unless you are unable to meet the above requirements, you still have two options to claim and receive your advanced payments:

If you’re not a tax – filer: If you are someone who doesn’t normally require to file taxes, IRS Non-Filer Portal is for you. Fill in the required details including ages of your children, SSN, ITIN, and submit an even simplified tax return.

If you are a tax- filer: You must file your tax returns 2020 to receive advance payments this year.

Even if you have earned money, it is suggested that you file your tax returns, whether you are required to pay taxes or not. It makes you eligible for other benefits of Tax credits which include Earned Income Tax Credit, which can also make you eligible to receive more refunds on your taxes.

The Child Tax Credit 2021 is for the tax returns which you will file in 2022. These advance Tax credits will make you receive the half Tax credit in 2021. To have the other half payment, you have to file your taxes in 2022. For first-time Tax-filers, you need to have an SSN or Taxpayer Identification number.

When are CTC payments received?

As mentioned earlier, you will receive your half tax credit payments this year and a half in the next only after filing your taxes. Otherwise, if you don’t want to receive half-payments this year, and need to have all of the lump sum amount next year when you file your taxes, then you may request the IRS to unenroll you from the Child Tax Credit 2021 advances payment program.

With this, you will get the amount of $1,800 for each child. If this will be divided into six small payments, you will get $300 for each child per month to start using and meet the expenses like food and care, rent, and utilities. This is why the checks are considered advanced payments.

The first advance payment was received on 15th July 2021, the second on 13th August 2021, and the families are expecting to receive the third on Sept.15.

CHILD TAX CREDIT PAYMENT SCHEDULE 2021

Monthly Payment/child between 0-5 Payment /child between 6-17
First Payment – July 15th $300 $250
Aug 13 $300 $250
Sept 15 $300 $250
Oct 15 $300 $250
Nov 15 $300 $250
Dec 15 $300 $250
Second-half of the payment: April 2022 $1,800 $1,500

Deadlines to opt for monthly payments

As said earlier, the advanced payment option is optional, and even with the least eligibility requirements, many families in the United States don’t qualify for it. If you think and foresee that your financial situation is or will take a turn in the long run, then it is recommended to opt for advance payments and avoid repaying the IRS. The deadline for opting out yourself is Aug 30th, 21. If you want to unenroll yourself from receiving advance payments, you can use the IRS Child Tax Credit Online Portal anytime between July and December only if you meet certain eligibility criteria.

To unenroll from receiving advance payments, the IRS suggests applying before three days of the first Thursday of the following month. Look at the following chart to know more about deadlines. Make sure that you have read all the requirements and are aware of the financial situations, as once you unenroll yourself from the program, it is almost impossible to re-enroll yourself to receive advance payments.

Plus, if you are enrolling as parents, you and your spouse need to request for unenrolling separately no matter if you have applied jointly in the first place.

CHILD TAX CREDIT 2021 UNENROLLING DEADLINES

Payments Non Enrollment deadline Payment date
July 28th 15th
August 2nd Aug 13th
September 30th Aug 15th
October 4th Oct 15th
November 1st Nov 15th
December 29th Nov 15th

Do you need to repay the IRS between Tax times?

If you have chosen to receive the advance payments while being eligible for Child Tax Credit 2021, you should know that you will get the other half of your payment next year on filing your taxes. You need to be aware of how much you will receive in 2021 and compare it with the rest you can claim in 2022. The IRS will then send you a letter, with an estimated personalized amount to be used for 2012 tax returns in 2022.

Once you know your estimated amount and the amount you have received in 2021 as advance payments, you may have to repay the IRS if you have received more than you are expected to receive. It is possible that the IRS overpaid you based on the Child Tax Credit on the previous year’s older amount information. If you think this may be the case and you would have to refund the IRS with the concerns to receive the payments all-in-one in 2022, then you can opt-out from the child credit tax advances payment programs adhering to the mentioned deadlines.

How to use IRS online Credit portals?

The IRS launched a Child tax credit online portal this summer. The first was launched for individuals who do not normally need to file tax returns such as low-income or no-income families. The Child Tax Credit tools are now available in English and Spanish languages to help families determine their eligibility.

The IRS online Portal helps eligible families to analyze their tax returns, calculate them, and enroll for advance monthly child tax credit payments. Through the portal, parents can update their financial information, mailing addresses, and can update their deposit details as well. It is possible in the coming months, that it will allow you to add or remove additional information such as if you get divorced or a newborn adds up in your family, so you can update their information right from the portal. Additionally, updating marital status, the total number of dependents and income details will be effortlessly updated through the portal.

What if you have not filed your taxes but still want to receive payment?

IRS advance payments for Child tax Credit 2021 will automatically choose the families who file their tax returns with the deadline of May 17, 2021. Families who do not require to file tax returns can claim for their share. However, if you find yourself eligible to file your taxes and didn’t file taxes till now, then you must use the IRS tool also known as the ‘Non-filer Sign-up tool’. This will require you to submit your income levels and a number of dependents in your households and let the IRS know how many child tax credits you should receive.

Through the portal, you can also file all your tax returns to receive the complete monthly CTC payment you owed.

What is the use of the IRS Non-Filer Portal?

The IRS non-filer portal is used for:

  • Signing up for the advance payments for CTC
  • Signing up for the future stimulus checks
  • Apply for Recovery Rebate if you have missed the previous stimulus checks (If you didn’t receive the full amount you were expecting or didn’t receive at all)

If you don’t qualify for the CTC payments, you can still use the non-filer portal for claiming your first and second stimulus checks and can apply for third. You must need to know how much money you own from the first and second stimulus checks. To see how to sign up and look for requirements, follow the step-by-step guide for using the IRS Non-filer portal.

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