What you need to know about the Expanded Advanced Child Tax Credit
As part of the $1.9 trillion coronavirus relief, the Biden administration started distributing expanded child tax credit payments last week, either by mail or direct deposit. If you have not filed your 2020 return, it’s based on 2019 so don’t stress it!
So what’s the amount? The credit is $3600 each year for children under the age of 6 and $3,000 for children between the ages of 6 to 17. You will not receive this in a bulk payment like the stimulus – it will be prorated each month in payments of $300/month for each child under 6 and $250/month for each child older than 6. This payment will be only for six months (from July to December), which, if you did the math on this, is only half of the $3,600. You will receive the other half of the credit when you do your return in 2022 for 2021.
Last year, the credit was $2,000 per child so this is much higher.
Do I have to apply? You don’t have to apply if you filed your taxes and the IRS has your bank account information.
Also, please don’t do this. There is a tool on irs.gov if you are a NON-FILER but Y’ALL, stop doing that. I have to amend zero returns to actual returns when you do this. If you work and have a job, business, you are probably NOT a NON-FILER. Non-filers are anyone who makes less than $12,400 unless you are self-employed, in which, case, that number is $400 minimum.
Who qualifies? If your AGI is $75,000 or less single, $112,500 as head of household or $150,000 or less for married, you’ll get the maximum amount; If you are above this, the child tax payments will begin to phase out by $50 for every $1,000 of income over it.
Okay, you qualify, WHEN do you get this monthly payment? You should receive it on the 15th of each month.
CHILDREN: Newborn babies born in 2021 makes you eligible for the whole $3,600 per child but you won’t receive that until you file your tax return in 2022. If your 5-year-old turns 6 before end of 2021, the max is $3,000. If your 17-year-old turns 18 before the end of 2021, you would receive $500 instead of $3,000. YAY PANDEMIC BABIES.
BE WARY and where to check: You can check out the IRS’ Child Tax Credit Update Portal to verify that you qualify and opt out of the payments. If you opt out, it does not mean you will not get them. If you qualify, it will just be deferred to next year when you file your tax return for 2021 in 2022. If you think your income will change or you will not qualify in the next year, you might want to opt out if you think you’ll have to pay it back. If you plan to opt out, both married parents will both have to unenroll.
As always, speak to a tax advisor or ask me any questions!