Under the American Rescue Plan Act (ARPA) of 2021, the child tax credit (CTC) was expanded to a fully refundable $3,000 per eligible child under 18 ($3,600 per child under 6). In addition, ARPA provided parents with advance child tax credit payments totaling 50% of the estimated amount of their 2021 child tax credit. The advance child tax credit payments were not based on or related to the $500 non-refundable credit for other dependents who do not qualify for the child tax credit.
For families who met the income threshold and other qualifications, the increased, fully refundable 2021 CTC provided an immediate benefit that is expected to reduce child poverty in the U.S. by 45%, according to the Center for Poverty and Social Policy at Columbia University. The question is: How do families go about obtaining and managing this tax credit including these advance payments?
The first payments of the 2021 advance child tax credit started appearing in parents' bank accounts on July 15, 2021. Here's what to do to check if your family is eligible, what you need to do to get them, and how much you are eligible to receive.
- Major changes to the child tax credit for 2021 included a larger, fully refundable credit, and advance payments during the last half of 2021.
- Eligibility is based on the presence of one or more qualifying child dependents in your household and certain other criteria.
- The amount you received was based on your modified adjusted gross income (MAGI).
- Most people didn't need to do anything to receive their advance payments, which were disbursed in July, August, September, October, November, and December of 2021.
- If you didn't receive some or all of your advance payments (which equaled half your overall credit), you can claim any amount due when you file your tax return in April 2022.
Find Out If You Are Eligible
First things first. Determine whether you are eligible to receive child tax credit and advance child tax credit payments in 2021. You are eligible if all of the following apply to you:
- You have a qualifying child defined as your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any one of these.
- You provide half of the qualifying child's support.
- The qualifying child lives with you for more than half of 2021.
- The qualifying child does not turn 18 before Jan. 1, 2022.
- You claim the qualifying child as your dependent on your taxes.
- The qualifying child is a U.S. citizen, U.S. national, or U.S. resident alien.
- You or your spouse, if married filing a joint return, have a main home in one of the 50 states or the District of Columbia for more than half the year.
Use the IRS Advance Child Tax Credit Eligibility Assistant to determine if you are eligible for advance child tax credit payments.
Your child tax credit amount can be reduced based on the amount of your 2021 modified adjusted gross income (MAGI).
Determine How Much You Are Eligible for
The amount you receive for your 2021 child tax credit is determined by your modified adjusted gross income (MAGI) and the amount, if any, by which it exceeds certain thresholds. The thresholds are:
- $150,000 if married and filing a joint return or if filing as a qualifying widow or widower
- $112,500 if filing as head of household
- $75,000 if you are a single filer or are married and filing a separate return
Provided your MAGI does not exceed the relevant threshold above, your 2021 tax year child tax credit for each qualifying child is:
- $3,600 for children ages 5 and under at the end of 2021
- $3,000 for children ages 6 through 17 at the end of 2021
The amounts above will be reduced by $50 for each $1,000 (or fraction thereof) that your MAGI exceeds the qualifying threshold above up to $400,000 if married and filing jointly or $200,000 for all other filing statuses.
The child tax credit won’t begin to be reduced below $2,000 per child until your MAGI in 2021 exceeds $400,000 if married and filing a joint return; or $200,000 for all other filing statuses.
Above these levels, your child tax credit decreases by $50 for each $1,000 (or fraction thereof) until it phases out entirely.
You May Not Need to Do Anything
If you were eligible to receive advance child tax credit payments based on your 2020 or 2019 tax returns, you should have gotten your six payments automatically. If you entered information in the IRS Non-Filer tool for Economic Impact Payments (EIPs) in 2020, that should also register you with the IRS and require no further action on your part.
If Necessary, File Your Taxes
If you haven't filed your 2019 or 2020 tax return, and you are required to, you should do that right away. Provide information about your bank account so you can receive your payments by direct deposit.
Use the IRS Non-Filer Tool
If you haven't filed and are not required to do so, use the IRS Non-Filer tool to file a simplified tax return that will allow you to register for advance child tax credit payments.
Advance Child Tax Credit Payment Schedule
When you are registered in the system, advance child tax credit payments should have been disbursed as follows:
|Payment Month||Payment Date|
Source: Internal Revenue Service
What to Do If You Are Missing Payments
If you were late applying or for some other reason did not get a July, August, September, October, or November payment, your December payment should have been the full advance amount (half of your total child tax credit for 2021). This means that instead of up to 6 payments, you received just one in December.
Alternatively, you can claim your full 2021 Child Tax Credit when you file your income tax return in 2022. You will be filing for half of your credit anyway and, if you didn't receive your full advance payment, you can claim whatever is due to you in April.
How to Create an ID.me Account
When the IRS determines your eligibility, it will calculate your child tax credit amount and process your advance payments automatically. To be proactive and inform yourself about your status, you must have an ID.me account.
An ID.me account provides a way to access your IRS information; register if you are a non-filer; and manage banking information, eligibility, or opt out of monthly payments if you prefer to receive one payment next year.
You do not need to create an ID.me account if you already have one from a state government or federal agency, or if you have an existing IRS account with a Secure Access username and password.
To create an ID.me account, start at the Child Tax Credit Update Portal. From there:
- Click on the Manage Advance Payments button.
- Click on the button marked ID.me Create an account.
- Enter your email, create and confirm a password, accept the terms, and click on Create an ID.me account.
- Read about ID.me then click Continue.
- ID.me will ask you to confirm your email then give you the option to set up multifactor authentication (a good idea) for added security.
- You will be asked to upload a picture of your photo ID, then take and upload a selfie using your phone or computer camera.
- Next, you will enter your Social Security number, confirm additional information, then click Continue.
- ID.me will send you a text message confirming that you want to set up an account. Click Allow and continue on the ID.me page to send verification to the IRS.
- If for some reason ID.me is not able to verify you, it will give you the option to have a video call with a "Trusted Referee."
- Otherwise, you can return to the Child Tax Credit Update Portal, log in, and manage your account.
In February 2022, the IRS announced a new security-enhanced method for creating an online account without requiring biometric data. For those that choose to use ID.me or have registered with it in the past, any uploaded images will be permanently deleted.
The Build Back Better Act Child Tax Credit Extension
Concern about whether Child Tax Credit advance payments would continue in 2022 overshadowed Congress' debates over passage of the Build Back Better Act (BBBA), which, among other things, extended the enhanced credit for at least another year. But the BBBA did not pass by the end of 2021 and so the advance payments and the increased sums ended with the December 2021 payment.
The child tax credit drops back to $2,000 per child and will not include advance payments in 2022. For the tax year 2022 and beyond, the credit will revert back to its pre-2021 rules.
The Build Back Better Act would have made the credit’s increased availability to the poorest families permanent, a move that the Jain Family Institute says would cut child poverty in the U.S. by 19%. BBBA would also have kept the enhanced child tax credit for all but the wealthiest families alive for one more year.
How Much Is the Enhanced 2021 Child Tax Credit Per Child?
Provided you qualify based on MAGI, the per-child tax credit for 2021 is $3,600 for each qualifying child who is 5 and under at the end of 2021 and $3,000 for each qualifying child who is age 6 through 17 at the end of 2021.
Is It Too Late to Receive the Child Tax Credit for 2021?
It is not too late to claim the full child tax credit for 2021, even if you did not receive a single advance payment. Simply claim your credit when you file in April 2022.
What Does the Build Back Better Act Have to Do With the Child Tax Credit?
Extending the enhanced credit program was one of the provisions of the BBBA: Enacting it would have continued the Advance Child Tax Credit in 2022 for most families and would have also made the enhanced credit permanent for the poorest families. But the program only went into effect if Congress passed the bill and it got signed into law by President Biden. Because of opposition from Democratic Sen. Joe Manchin of West Virginia, the BBBA did not come up for a vote in the Senate, and so the enhanced program expired at the end of 2021.
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