The federal child tax credit has the potential to lift millions of families out of poverty. Families are using the benefits for a number of expenses to support their children. Discover the following Q+A to help clarify questions about this crucial credit.
Q. What is the Child Tax Credit?
A. The Child Tax Credit (CTC) is a tax credit that nearly every taxpayer with children receives each year. In 2021, as a result of the American Rescue Plan Act, the credit has been expanded and will be made partially in advance payments beginning July 15, 2021 and ending on December 15, 2021. You can learn more about the CTC and its expansion by reading this article. The article answers some of the most common questions about the CTC that Legal Aid of Nebraska has received.
Q. How much are the payments? When will I get them?
A. The CTC advance payments are based on the number and age of children in each family. For each child under the age of six on December 31, 2021, the advanced payments will be $300 a month.
For each child at least six and up to the age of eighteen on December 31, 2021, the payment will be $250 a month. If the IRS has the taxpayer’s bank account information, the payments will be deposited on the fifteenth of each of the last six months of the year (July through December). If the IRS does not have bank information, they will mail a paper check, which will take a week or so longer to arrive than a direct deposit.
“For each child at least six and up to the age of eighteen on December 31, 2021, the payment will be $250 a month.”
Q. What is the Child Tax Credit Update Portal?
A. If a taxpayer wants to opt out of payments or change their bank account information for future payments, they can use the IRS Child Tax Credit Update Portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.
To use the portal, make sure to have photo identification on hand and be prepared to answer the identity-verification questions. This protects you by making sure that no one except you can update your information with the IRS.
Q. Why would I want to opt-out?
A. It sounds a little backwards — opting out of a payment — but there are some good reasons why a person might want to opt-out of the remaining CTC advance payments. If you’re receiving payments, but will not be claiming your child(ren) on your 2021 tax filing, you will end up needing to pay back any advance payments you mistakenly received. Since the payments can total $1500 for each child between ages 6 and 18, and $1800 for each child under the age of 6, someone with multiple children can end up owing the IRS a lot of money when it comes time to file their 2021 taxes.
For many families with unmarried parents, the parents take turns on who claims the child tax credit for each year. These families will want to be sure that they are opted out and do not have a large tax bill to pay next spring. For example, Merideth and Benjamin are divorced parents of Jay (11) and Sonia (13). As part of their custody agreement, Merideth claims the child tax credit in odd-numbered years and Benjamin claims it in even-numbered years.
Because Benjamin claimed the credit on the most recent return filed (2020), the IRS will automatically pay Benjamin, not Merideth the advance child tax credit payments. However, since the credit is based on the 2021 filing, Merideth is the parent who will be able to claim the credit for both children.
“If you’re receiving payments, but will not be claiming your child(ren) on your 2021 tax filing, you will end up needing to pay back any advance payments you mistakenly received.”
To ensure he doesn’t end up owing $3000 (the amount of the advance payments for two children over the age of 6) to the IRS when he files his taxes next spring, Benjamin should opt-out of the advance payments by using the IRS’ Child Tax Credit Update portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.
Currently, Merideth is unable to “opt-in” to the advance payments but the IRS will make it possible for her to do so later this year.
While Merideth may be frustrated that she is not getting the advanced payments at the moment, whether she gets the advance payments or not won’t affect the total amount of the credit she receives. Just like with the stimulus payments, anyone who received advance payments will get a letter from the IRS in January 2022 with the total amount of payments received. This amount will be included on the individual’s tax filing and the IRS will add any ‘missing’ advance payments to the amount of the person’s refund (or deduct it from the amount of their tax owed).
Q. Why didn’t I get a payment?
A. The IRS is basing the payments on the 2019 and 2020 tax returns that they have processed — whichever year is more recent. For most families, the IRS will be able to get the data they need to determine the amount of payments from the most recent return processed, but for others this data may be inaccurate.
For families with a child born or adopted since the last tax filing, or people who may not have claimed a child in 2020 that they will claim on their 2021 taxes, the IRS will not have this information, causing the payment from the IRS to be absent or smaller than it should be.
Soon the IRS portal will allow individuals to update the IRS on their family size, (or the bank account they would like their payments deposited to). Just like in the example above, any problems with the amount of advance payments will be fixed when the taxpayer files their 2021 taxes next spring.
If you still have questions:
- Contact Legal Aid of Nebraska by calling the ACCESSLINE with any questions: 1-877-250-2016, Monday/Wednesday 8:30 a.m. – 11:30 a.m.; Tuesday/Thursday 1 p.m. – 4 p.m. to speak with someone in our Tax Project about your situation
- Tune in to our next Child Tax Credit webinar in September. Watch our Facebook page for a link to register.
- Watch our Tax Project Managing Attorney’s Tax Chat on the Child Tax Credit.
- Watch our first Child Tax Credit Webinar
Shailana Dunn-Wall (she/her/hers), Christine A. Brunswick Public Service Fellow and Fellowship Staff Attorney at Legal Aid of Nebraska, is the author of this article.