Advance Payments for 2021 Child Tax Credit
On July 15, the IRS announced that millions of American families started receiving monthly Child Tax Credit payments. The payments will continue each month. Generally, anyone who receives a payment in July will also receive a payment each month for the rest of 2021 unless they unenroll. Future payment dates are Aug. 13, Sept. 15, Oct. 15, Nov. 15, and Dec. 15.
Child Tax Credit for 2021
The child tax credit and advance payments are based on several factors, including the age of your children and your income.
The credit for children ages five and younger is up to $3,600 –– with up to $300 received in monthly payments.
The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in monthly payments.
To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:
- Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
- A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
- Income less than certain limits
You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds.
Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.
Amounts received in advance will not be available when your 2021 tax return is filed, which may reduce or change your refund. If you receive advance payments that you are not entitled to, you will repay those upon filing your 2021 tax return. In January 2022, the IRS will send Letter 6419 summarizing advance payments made, and it should be retained with other tax documents.
IRS Website and Portal
The IRS has created a website devoted to the Advance Child Tax Credit Payments in 2021.The IRS uses the website to communicate information to and receive information from taxpayers. Currently, the website includes tools to unenroll or manage payments, submit information for non-filers, and check eligibility according to the IRS. To access these items, you must sign in with an existing user account, or create an account through id.me, as prompted online. Photo identification will be required to authenticate your identity. The IRS is constantly adding functionality to the portal as far as what information can be updated, with many enhancements scheduled for September. Please note that if you are married filing jointly, and choosing to unenroll, each spouse will have to do that separately.
What is Right For Me?
Taxpayers generally will not need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments. This may not be the best answer for your personal situation. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.
Please contact your local Kemper office if you have questions or need additional information on how these changes will impact you.