Child Tax Credit: When Is Your First Monthly Check Coming?
(CBS Philadelphia) -- The first round of advance Child Tax Credit payments will be sent out on July 15. But when will your first check actually arrive? That could depend on how your last stimulus check or tax refund arrived. The Internal Revenue Service (IRS) will soon start sending monthly payments to millions of parents, thanks to the American Rescue Plan passed back in March. The amount will depend on household income and the number of children in the household. If the IRS has your latest bank account information and has issued direct deposits in the past, the deposit should show up Thursday or soon after. (Like stimulus checks, it could take a few business days for the money to actually make it into accounts.) If you have received stimulus checks and tax refunds by mail, it will depend on the vagaries of the U.S. mail system.
How Much Will Your Check Be?
The IRS will pay $3,600 total per child to parents of children up to five years of age. That changes to $3,000 for each child ages six through 17. Half of the total will be paid as six monthly payments and half as a 2021 tax credit. The IRS will make a one-time payment of $500 for dependents age 18 or full-time college students up through age 24.
The updated Child Tax Credit will be based on parents' modified adjusted gross income (AGI), as reflected on their 2020 tax filing. (AGI is the sum of one's wages, interest, dividends, alimony, retirement distributions and other sources of income minus certain deductions, such as student loan interest, alimony payments and retirement contributions.) The amount phases out at a rate of $50 for every $1,000 of annual income beyond $75,000 for an individual and beyond $150,000 for a married couple. The benefit will be fully refundable, meaning it will not depend on the recipient's current tax burden. Qualifying families will receive the full amount, regardless of what they owe in taxes. There is no limit to the number of dependents that can be claimed.
For example, suppose a married couple has a three-year-old child and a seven-year-old child and showed an annual joint income of $120,000 on their 2020 taxes. The IRS will send them $550 per month starting in July 15. That's $300 per month ($3,600 / 12) for the younger child and $250 per month ($3,000 / 12) for the older child. Those payments will last through December. The couple would then receive the $3,300 balance -- $1,800 ($300 X 6) for the younger child and $1,500 ($250 X 6) for the older child -- as part of their 2021 tax refund.
Parents of a child who ages out of an age bracket will be paid the lesser amount. That means if a five-year-old turns six in 2021, the parents will receive a total credit of $3,000 for the year, not $3,600. Likewise, if a 17-year-old turns 18 in 2021, the parents will receive $500, not $3,000.
An income increase in 2021 to an amount above the $75,000 ($150,000) threshold could lower a household's Child Tax Credit. The IRS has confirmed that they'll soon allow claimants to adjust their income and custodial information online, thus lowering their payments. Failure to do so could increase one's tax bill or reduce one's tax refund once 2021 taxes are filed.
Eligibility requires that the dependent be a part of the household for at least half of the year and be at least half supported by the taxpayer. A taxpayer who makes above $95,000 ($170,000) -- where the Credit phases out entirely -- will not be eligible for the expanded credit. But they can still claim the existing $2,000 credit per child.
Families that may be eligible received a qualifying letter in the first half of June. It read, in part, "If you're eligible for advance CTC payments and want to receive these payments, you don't need to take any action. You will receive a letter with more details."
The second letter estimating the amount is pending.
What If I Want To Opt Out Of Monthly Payments?
Parents who filed taxes in 2019 and/or 2020 and meet the income requirements will automatically start receiving advance Child Tax Credit payments on July 15 or soon after. There is nothing more to be done. But some parents may prefer a lump-sum payment at tax time rather than six monthly payments and a smaller tax credit. The deadline to opt out before the July 15 payment has already passed. But the deadline to opt out of the August 13 payment is August 2.
Subsequent opt-out deadlines for payments going forward will occur three days before the first Thursday of the month for which someone intends to opt out. Here are the remaining opt-out deadlines:
- Payment Date: August 13 / Opt-Out Deadline: August 2
- Payment Date: September 15 / Opt-Out Deadline: August 30
- Payment Date: October 15 / Opt-Out Deadline: October 4
- Payment Date: November 15 / Opt-Out Deadline: November 1
- Payment Date: December 15 / Opt-Out Deadline: November 29
The Child Tax Credit Update Portal allows users to make sure they are registered to receive advance payments. It also lets recipients unenroll from advance payments in favor of a one-time credit when filing their 2021 taxes. Starting in early August, the tool will allow users to add or modify bank account information for direct deposit. Other features coming to the portal include viewing payment history and updating dependents.
To access this portal, users need an IRS username or an ID.me account. ID.me is a sign-in service used by various government agencies, including the IRS, Social Security Administration and Treasury Department, to authenticate users. Users need valid photo identification to create an account.
From the portal page, a user should click the "Manage Advance Payments" button. Log into your account on the next page, or create an account. Once logged in, a user can view their eligibility and change how the Credit will be received.
What Other IRS Tools Are Available?
The Child Tax Credit Non-Filer Sign-Up Tool is to help parents of children born before 2021 who don't typically file taxes but qualify for advance Child Tax Credit payments. That means parents who have not filed their 2020 taxes, are not required to file, and don't plan to file. (Parents who claimed their dependents on their 2019 tax return should not use this tool.)
Users enter their personal information, including their name, mailing address, email address, date of birth, relevant social security numbers, bank account information, and identity protection PIN. The IRS uses the information to check eligibility and, once confirmed, will begin making payments. The IRS and experts advise using the tool on a desktop or laptop computer rather than a mobile device.
The Child Tax Credit Eligibility Assistant lets parents check if they are eligible to receive advance Child Tax Credit payments. Users will need a copy of their 2020 tax return or, barring that, their 2019 tax return. It's also reasonable to estimate income and expenses from the appropriate tax year, though the result may not be accurate. The assistant asks multiple questions to determine eligibility, but does not ask for sensitive information. No entries are recorded.
Originally published Friday, July 9 at 4:36 p.m. ET.
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