JACKSONVILLE, Fla. — Parents can get an extra $1,800 this year in child tax credit under the new American Rescue Plan passed in March, but there's more changes they'll want to know before monthly payments automatically start to go out in July.
For 2021, the child tax credit provides a credit of up to $3,600 per child under age 6 and $3,000 per child from ages 6 to 17. If the credit exceeds taxes owed, families may receive all of the excess amounts as a refund.
The credit will also be available periodically throughout the year, rather than as a lump sum at tax time.
“So, what they're doing is they're taking $300 a month for qualifying children if you're under the income limits, and they're sending that out to you in either a check or direct deposit on a monthly basis starting in July and going through the end of the year," Isaac Brohinsky, a GunnChamberlain partner said.
The Jacksonville CPA says there is also an option to opt-out of the monthly payments.
“In most cases, I would say take the payment. And the reason why is because you get that money sooner, you can use that for household expenses that you may have," Brohinsky explained. "If you're in good shape with your household and don't need that for your monthly expenses, you can use it to pay down debt or you can use it to maybe kickstart your family savings."
Some parents like Melinda Doty are choosing to opt out due to the possibility of being overpaid and owing the IRS money. She only want good surprises come April.
“I figured if we opt out now then get a refund, that's fine," Doty said. "But, we won't have to pay anything back if they overpay us.“
If parents don’t have an IRS login, she recommends they allow some time to go through the opt out process using ID.me, which will require you to input personal information and a copy of your photo id.
“And then even though I'm filing jointly with my husband, and we both have two dependents, the same dependence, he had to do the same exact process," Doty explained. "So, it ended up being about a 30 minute adventure for each of us, which I thought is gonna be very frustrating for some people.“
If parents want to opt out, they need to do it at least three days before the first Thursday of the month their opting out of. For example, the deadline for July is Jun. 28.
Parents can also choose to opt out of all monthly payments.
If you have any additional questions, the White House has set up a new child tax credit website that includes FAQ for families and other downloaded content.
There is also three IRS portals that are key to signing up for and managing the child tax payments in 2021 and 2022.
Here's how the online tools will help parents with eligible dependents, according to the IRS:
- The Child Tax Credit Update Portal lets you verify that your family qualifies for the credit and opt out of receiving any payments this year.
- A non-filers portal lets you provide the IRS with basic information about yourself and your dependents if you normally aren't required to file a tax return.
- The Child Tax Credit Eligibility Assistant, also now open, can help you determine whether you qualify for the advance child tax credit payments.