Letters from the Internal Revenue Service have been sent out to over 36 million Americans who may be eligible to receive advance payments of their 2021 Child Tax Credit. As part of a tax provision in the American Rescue Plan, payments will begin hitting bank accounts on July 15 and will continue every month until December. The IRS recently opened a portal to help families with this process and second letters are on their way detailing exactly how much these families can expect to receive every month.
This article will answer the following questions about the Child Tax Credit:
Do I have to pay this money back?
What happens if I gave birth to a new baby in 2021?
Do I have to accept the money?
What if I am not required to file taxes?
Are non-citizens eligible for these payments?
Child tax credits are not a new concept. Each year, tax-filers receive extra money on their refund for having children. You generally do not need to pay this money back, unless your income drastically increases in 2021. If your income exceeds $75,000 as a single person, $112,500 as a Head of Household, or $150,000 as a married couple, you do not qualify for these payments.
Receiving monthly payments will not reduce your 2022 refund. The difference here is, this specific benefit allows eligible individuals to get an advance on half of their upcoming refund. This means that even if you do receive all of the payments from July until December, you will still receive the remaining half as a refund next year when you file taxes.
For each child aged 0-5, you will receive $3,600 on your refund or if you receive monthly payments, you will receive half ($1,800) in monthly payments of $300 per month starting in July and the remaining half ($1800) when you get your refund next year.
For each child aged 6-17, you will receive $3,000 on your refund or if you receive monthly payments, you will receive half ($1,500) in monthly payments of $250 and the remaining half when you get your refund next year.
Some people may want to opt out of receiving these payments, in order to get all of the money at once, next year. However, it is important to know that tax refunds are garnishable and monthly payments are not. Meaning, if you owe any money for student loans, child support, etc. your tax refund can be taken away, but the new monthly payments cannot.
If you filed a tax return in 2019 or 2020 and claimed your children, you will not have to take any action to receive these monthly payments. However, if you are a non-filer, additional action is needed. This is why the IRS created the Child Tax Credit Non-filer Sign-up Tool. This portal is also a place where non-filers can claim missing stimulus payments and can now claim the child tax credit as well.
A second portal for individuals who had a baby in 2021 or want to opt-out of these payments is currently being created by the IRS.
Some non-citizens will qualify for the child tax credit, if they have an Individual Taxpayer Identification Number (ITIN) and if they have children with social security numbers. More information can be found here and you can use the IRS portal to verify if you are eligible.
