Last Updated: July 15, 2021
With the introduction of the American Rescue Plan back in March, the Child Tax Credit underwent a couple temporary changes for tax year 2021. One of the main adjustments included allowing families to receive part of the Child Tax Credit as monthly payments rather than waiting to get all of the money as a refund when they file their tax returns. This is considered an advance of the credit. The premise behind this change is to continue to help families who experienced a financial hit during the COVID-19 pandemic.
On June 7, the IRS officially announced the payment dates, with the first round of payments starting on July 15, 2021. The payment timeline is as follows:
- July 15, 2021
- August 13, 2021
- September 15, 2021
- October 15, 2021
- November 15, 2021
- December 15, 2021
IRS CTC Letters
At the end of June, the IRS began sending letters to the American families who may qualify to receive monthly Child Tax Credit payments. The two different letters were titled Advance Child Tax Credit Outreach 6416 and 6416-A.
The first letter was an eligibility notification. See an example of the first letter, Letter 6416. The second letter was more personalized and listed an estimate of the payment amount you could expect to receive each month based on the information the IRS has from your last filed tax return. See an example of the second letter, Letter 6416-A. For more information on the letters, visit the IRS’ resource page: Understanding Your Letter 6416 or 6416-A.
If you have not filed your 2020 tax return, the IRS urges you to file as soon as possible so they have the most current information to accurately process your payment. The IRS will otherwise use your 2019 return to calculate your possible credit amount.
Individuals who used the IRS’ Non-filers tool in 2020 are also eligible for the credit and should have received the letter notifications as well.
How much will your payment be?
This new monthly payment structure is designed to pay eligible families half of the credit amount for which they qualify. Families will receive the second half of the credit as part of their tax refund when they file their 2021 tax return. The maximum amount families can receive per month is $300 for each child age five and under and $250 for each child between the ages of six and 17.
Let’s dive into how that works.
The value of the credit significantly increased for 2021 with the passing of the American Rescue Plan. That said, it’s slightly complicated to determine how much you may qualify to receive. Here are the basics:
- Eligible families can get up to $3,600 per qualifying child who is under the age of six and up to $3,000 per qualifying child between the ages of six and 17. Prior to 2021, the credit was worth up to $2,000 per qualifying child and 17-year-olds were not included.
- The amount you receive is based on your adjusted gross income (AGI). You will get the maximum value of the Child Tax Credit if your AGI is:
- $75,000 or less for single filers,
- $112,500 or less for heads of household, and
- $150,000 or less for married couples filing a joint return and qualified widows and widowers
You can find your AGI on line 11 of your 2020 Form 1040 or 1040-SR.
If your AGI is higher than those limits, you could still receive a portion of the tax credit. In that event, the new portion of the credit that’s been temporarily added to the original $2,000 credit (either $1,000 or $1,600 per child) is reduced by $50 for every extra $1,000 you earn above the income thresholds. For example, if you file a joint 2021 return, have an AGI of $160,000 and two children five and under, your full Child Tax Credit amount will likely be $6,700.
The IRS’ New Advance Child Tax Credit Portal
The IRS created an Advance Child Tax Credit 2021 portal that houses information regarding the credit and corresponding payments. Additionally, the portal is home to three different tools related to managing the Child Tax Credit payments. All are accessible with internet access and a smart phone or computer.
The first tool is called the Child Tax Credit Eligibility Assistant, which allows families to find out if they qualify for the credit. The tool asks a series of questions to determine eligibility.
The second tool is called the Child Tax Credit Update Portal. Using this tool, families can verify their eligibility for the payments, choose to unenroll or opt out from receiving the monthly payments, and provide the IRS updated bank account information. Families who opt out will receive any credit amount they qualify for as a lump sum when they file their tax return next year. This tool is secure and password-protected.
The IRS has stated future versions of the Child Tax Credit Update Portal will allow families to view their payment history and check the status of their payments. They’ll also have the ability to make updates to bank account details, mailing address information, family status and income changes. For instance, if you have a baby or adopt a child in 2021, you’ll have the ability to update the IRS with that information to help ensure your payments are as accurate as possible. The IRS projects users will be able to update their mailing address in early August. The additional functionality is slated to be available in the fall. We’ll update this page as those features become available.
The third tool is the IRS Non-filer Sign Up Tool. Continue reading for more information on who should consider using this tool.
For more information on the tools, read the IRS’ official notice.
IRS’ Non-filer Sign-up Tool
Families who qualify for the Child Tax Credit but are not required to file a tax return can register for their monthly tax payments using the IRS’ Non-filer Sign-up tool available on the IRS website.
This tool is an updated version of the IRS’ Non-filers tool created in 2020 to help filers who weren’t required to submit a tax return register for the Economic Impact Payments (EIP) – or better known as the stimulus checks. It also allows people who aren’t otherwise required to file a return claim the Recovery Rebate Credit for any amount of the first two rounds of EIP they missed.
With this free tool, families can conveniently provide the IRS the basic information needed to receive their monthly Advance Child Tax Credit payments. Eligible families need to submit the following information:
- name
- address
- social security number (SSN)
- names and SSNs for qualifying children age 17 and under
- information on other dependents
- direct deposit bank information (If you do not have a bank account, the IRS will issue the monthly payments in the form of a paper check. Please note it will take longer for you to receive the money in that instance.)
You may need to register for the monthly payments if all of the following are true about your situation:
- You earn little or no income, and therefore, do not have an income tax return-filing obligation.
- You did not file a tax return for 2019 or 2020.
- You did not use the IRS’ Non-filers tool last year to register for the EIP.
File Your 2020 Tax Return for Accurate Payments
If you believe you are eligible for the 2021 Child Tax Credit, the IRS urges you to file your 2020 return as soon as possible if you haven’t already done so. If you have filed and qualify for the credit, there are no further steps you need to take to get your money.
Filing your 2020 return as soon as possible will provide the IRS with the most accurate information about your tax situation. That includes your dependent information as well as current bank account details. Monthly payments will be issued via direct deposit or paper check.
If you are not required to file a tax return because you earned little to no income, use the IRS’ Non-filer Sign up tool to register. See the information above to determine if you need to register.
