The American Rescue Plan provided for significantly increased Child Tax Credits. The credits for 2021 are up to $3,600 per qualifying child, as opposed to $2,000 before (and after). (In 2021, a qualifying child is typically a child under age 18 at the end of 2021 for whom the party claims the tax exemption.)
The American Rescue Plan also provided for the IRS to make monthly advance payments, starting in July.
The six advance payments will be 1/12 of the amount the IRS calculates the party should receive for 2021. Typically, this amount will be $250 or $300 per child. From July through December 2021, these payments will provide half of the party’s Child Tax Credit for the year.
Parents can elect to receive the six advance payments via direct deposits or via mail.
The other half of the Child Tax Credit will come in an income tax refund, the traditional way.
Eligible Parents Can Receive the Child Tax Credit Refund via Direct Deposit
What if your client is eligible but the IRS does not have your client’s bank account information?
The IRS has just opened a portal where eligible recipients can enter their information so they can get the advance payments deposited directly. To learn more or to sign up, send your clients to:
Also, if a client wants to get the full credit on their 2021 tax return (to be filed in 2022) – and not get the advance payments – they can inform the IRS of their choice through the portal.
Finally, if the IRS is not aware that your client qualifies, they can sign up via the portal as well. This could be the case if they did not have enough income to require a tax return in the past, if an agreement provides a change of dependency exemption for 2021, or if they have a newborn who was not entered on a previous tax return.
Child Tax Credit Advance Refunds Coming Soon!
Starting July 15, millions of families will start receiving monthly Child Tax Credit payments. Your clients could be among them, and they’ll definitely have questions.
2021 Tips: Child Support and the Child Tax Credit
The American Rescue Act introduced dramatic changes in the Child Tax Credit, the Child Care Credit, and the Earned Income Credit – but only for 2021.