In May, our Certified Financial Trainer Tina wrote this helpful blog post to inform our clients and readers about this year’s unique Child Tax Credit and to help parents know what to expect as the program rolled out. Now that many people have received their first payments, an update is in order!
First things first: The first payments from the Child Tax Credit went out July 15th, and the next one is due to go out August 13th. If you did not receive your payment and were expecting one, you should go to the IRS update portal to make sure all of your information is current. If you have relocated and typically get payments by check, be sure the address is on file, and if you are expecting a direct deposit, be sure your account information is entered correctly. If the portal says a payment has processed but you still haven’t received it, you can file a request for a payment trace. (You can also do this for any stimulus money you haven’t received.)
Another important thing to be aware of is that these are advance payments. If you are income eligible, you are receiving half of your total tax credit in the form of advance payments, and then you’ll receive the other half as a tax credit in 2022.
It’s important to note that your eligibility for these funds is based on your past income, so if you expect your 2021 income to be higher than 2020, you may want to opt out of the advance payments so that you don’t wind up owing the money back to the IRS. Single filers who earn less than $75,000 per year, heads of household earning less than $112,500 per year and married couples who make less than $150,000 a year are eligible for the full amount, so you will want to take a look at whether your income in 2021 will bring you up above these thresholds. If so, you can use the update portal to opt out of future payments.
There have also been a lot of questions about the eligibility for children born in 2021 and those who turn 18 in 2021. Children born before December 31, 2021 ARE eligible for the tax credit, but those who turn 18 this year are not. However, if you have a dependent child who is 18 years old, they do qualify for a one time $500 payment. You will need to make sure that information about family size and number of children is correct in the IRS Update Portal. Dependent adult children ages 19-24 who are full time college students may also qualify. These payments will be received when you file your 2022 taxes.
This tax credit will be a huge help to families who have been negatively impacted by economic uncertainty throughout the pandemic, and is something that many argue we should keep even after the crisis. Still, since it is new, it will be important to stay informed about the payment process and be sure to understand how your family will be affected by any changes in your income.