As part of the American Rescue Plan, parents can receive advance payments of their Child Tax Credit for 2021. Usually, the credit would be included with the tax return. For the rest of this year only, parents can receive half of their estimated 2021 Child Tax Credit through monthly payments beginning July 15, and the other half along with their 2021 tax returns.
The total credit amount also increased, subject to an income threshold. The credit is now $3,600 per child age five and under, and $3,000 per child ages 6 – 17 (with ages calculated at the end of 2021). Generally, parents claiming the credit can expect six monthly advance payments of $300 for each child five years old or younger, and six payments of $250 for each child 6 – 17 years old.
Automatic Enrollment
If you filed 2019 or 2020 taxes and claimed the Child Tax Credit, you will automatically receive the advance payments for your estimated 2021 taxes. The payments will be delivered via direct deposit if there is a bank account on file with the IRS, or via check in the mail otherwise. You may need to compare the amount you were paid during the year with the amount you should have been paid for your 2021 taxes, so keep any letters from the IRS for your records.
Notably, if income is below $40,000 as a single filer, $50,000 as head of household, or $60,000 if married and filing jointly, you may qualify for “repayment protection.” In that case, you may be able to keep a portion or all of the money you were overpaid.
New Enrollment
If you were not required to file and did not file 2020 taxes, and you want to claim the Advance Child Tax Credit, you can enroll through the IRS website. For example, if your income was below the threshold required to pay taxes for 2020, you can still file to receive the credit for 2021 by enrolling online, just as with other economic impact payments.
If you filed 2020 taxes and did not claim the Child Tax Credit, but you plan to claim it for 2021 and want to receive advance payments, keep an eye on the IRS’s website for changes to the Child Tax Credit Update Portal. For now, the portal only allows changes to address and bank account information. Later this summer, the portal will be expanded to allow parents to add a child to be claimed on 2021 taxes that was not claimed in 2020. The IRS has not set a specific date for the change. Once you are able, you must use the portal to add your child and claim the Child Tax Credit for 2021. Once the information is processed, you will begin receiving monthly payments. The remainder you are owed will be paid with your 2021 return as a lump sum.
Unenrollment
If you do not want advance payments, but you still plan on claiming the Child Tax Credit for 2021, you can unenroll through the IRS website now, to take effect in August. The rest of your credit will be paid with your 2021 tax return as a lump sum.
If you do not want to claim the Child Tax Credit for 2021 at all, unenroll through the IRS website as soon as possible and keep track of the money you received before unenrolling. Since payments for July have already been processed, you will receive that payment regardless and may need to reconcile it on your 2021 taxes.
A Note for Divorced Spouses:
Divorced spouses sometimes alternate who claims the Child Tax Credit, which makes the automatic advance payments a hassle. If Parent 1 claimed the child last year, that parent will receive the Advance Child Tax Credit payments automatically. For Parent 2 to claim the credit instead, Parent 1 must unenroll from the advance credit, and Parent 2 should enroll as soon as the Update Portal is ready. Parent 1 will likely need to repay the IRS for any credit payments received, while Parent 2 will be owed the total credit amount.
Further information is available at:
https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
