What is the 2021 Advance Child Tax Credit?

The Advance Child Tax Credit payments are early IRS payments of 50% of the estimated amount of the Child Tax Credit you may claim on your 2021 tax return. Meaning, you can receive half of your Child Tax Credit for each qualifying child in equal payments for each month for the rest of 2021, beginning on July 15, 2021, and ending on December 15, 2021. The following IRS chart shows the payment schedule.

Source: https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-e-advance-payment-process-of-the-child-tax-credit

How do I qualify?

To qualify, the following conditions must be met:

• You must have a qualifying child or children under the age of 18 at the end of 2021 with a valid Social Security number.
• You must have filed a 2019 or 2020 tax return and claimed the Child Tax Credit on your return or given the IRS your information in 2020 to receive the Economic Impact Payment by using the IRS non-filing tool. This tool enables non-filers for 2018 and 2019 to register to receive their Economic Impact Payment.
• You or your spouse, if married filing jointly, must have your main residence in one of the 50 states or D.C. for more than half the year.
• You must meet the income limits.

For further questions or details, please visit the IRS Advance Child Tax Credit Eligibility Assistant to check your eligibility.

If I make too much money, will that automatically disqualify me from getting the Advance Child Tax Credit?

Not necessarily. The advance payments may be reduced if your modified AGI exceeds:

• $150,000 if married and filing jointly or if filing as a qualifying widow or widower; or
• $112,500 if filing as head of household; or
• $75,000 if you file as single or you are married and filing a separate return.

How do I know my child is a qualifying child?

A qualifying child is an individual who does not turn 18 before January 1, 2022, and meets the following conditions: 

• The individual must live with the taxpayer for more than one-half of 2021, must be the taxpayers dependent, and must be a U.S. citizen, U.S. national, or U.S. resident alien.
• The individual cannot provide more than one-half of their own support during 2021 and cannot file a joint return with the individuals spouse for 2021.

For more details about who qualifies as a qualifying child, please visit the IRS website.

Does the payment amount change depending on my child’s age?

Yes. The Advance Credit is $3,600 for children aged five and younger at the end of 2021; and $3,000 for children aged six through seventeen at the end of 2021.

So, how much money will I receive each month?

Generally, you will receive $300 a month for each qualifying child aged five and younger. The Advance Child Tax Credit represents 50% of the total $3,600, which is $1,800. The $1,800 is then divided equally into six monthly payments of $300 each beginning in July 2021 and ending in December 2021.

Generally, you will receive $250 a month for each qualifying child aged 6 through 17. The Advance Credit for this age band represents 50% of the total $3,000, which is $1,500. As above, the $1,500 is then divided into six equal payments of $250 beginning in July 2021 and ending in December 2021.

Will the IRS send me the Advance Child Tax Credit directly, or how does it work?

Yes, the IRS will send the payments directly to you by direct deposit or by mail. If the IRS has your banking information, then you will receive a direct deposit. If the IRS does not have your banking information, you will be sent the payment by mail.

Now that I know the basics, what is the timeline for updating my information?

If you would like to update your information, the following IRS chart details the dates and states what exactly you can update.

Source: https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-a-general-information

The IRS website has an option of unenrolling. Why would I want to unenroll? Who says no to free money?

There are several reasons why you may want to unenroll.

First, you may prefer to get one large credit when filing your 2021 tax return next year rather than six smaller payments.

Second, you may want to unenroll if you expect a significantly higher income for 2021 because the Advance Credit is based on your 2020 tax return, and this may mean you receive a higher advance than you are supposed to receive.

Third, you will need to unenroll if your spouse has already enrolled for payments, and you are married and filing jointly.

So, maybe the Advance Child Tax Credit is not right for me. How do I unenroll?

The Advance Child Tax Credit may not be the best for everyone. You can unenroll by visiting the Child Tax Credit Update Portal. It is important to note that if you unenroll you cannot re-enroll until late September 2021.

The deadline to unenroll is three days before the first Thursday of the next month by 11:59 p.m. Eastern Time. The July deadline has passed; however, should you elect to unenroll there is still time to do so for the August through December payments. The IRS website provides the following chart of IRS deadlines to unenroll.

Source: https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-j-unenrolling-from-advance-payments

More specific questions

It can be a difficult decision whether to obtain the Advance Credit and the tax attorneys at RJS LAW are qualified to help explain the benefits and drawbacks. Please call (619) 595-1655 if you have any questions.

Published by Aurora Gallardo

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