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Child Tax Credit Tools Include Changes to Benefit Families

The Internal Revenue Service & Treasury Department introduced an online child tax credit tool to help families register for monthly payments from the expanded Child Tax Credit. The goal is to streamline the process and encourage families to enroll that do not normally file a tax return. Families can now use the tool to register for the expanded Child Tax Credit offered under the American Rescue Plan Act.

Congress passed the American Rescue Plan in March 2021, providing families with up to $300 monthly for each child, starting in July and through the end of the year. For the 2021 tax year, the Child Tax Credit has been raised. Previously an amount of $2,000 was set per qualifying child. However, at the end of 2021, families can receive $3,600 for children under the age of five and $3,000 for children between the age of 6 and 17.

Families that file taxes will be automatically enrolled in the program.

How Advanced Child Tax Credit Payments Work in 2021

The online child tax credit tool is designed for people who are not required to file a 2020 tax return or do not plan on filing. Furthermore, people who did not receive the full amounts for the first and second Economic Impact Payment can also utilize this tool if they are non-filers and want to claim the 2020 Recovery Rebate Credit to receive the third Economic Impact Payment.

Significant changes are made to the Child Tax Credit to help families get advanced payments starting this summer. The IRS will pay half of the total amount in advanced monthly payments, starting from July 15, 2021. Families can claim the remaining amount when they file 2021 income tax returns. It is important to emphasize that these changes apply only to the tax year 2021.

To qualify for the Child Tax Credit payments, you and your spouse (in case of a joint return) must fulfill these criteria:

  • A primary home in the U.S. for more than six months. You can also file a joint return with your spouse if they have a home in the U.S. for more than six months.
  • A qualifying child with a valid Social Security number who will be under 18 at the end of 2021.
  • Made less than certain income limits.

People who filed 2019 or 2020 tax returns or registered for the Economic Impact Payments last year using the IRS Non-filers tool are not required to take any further action. Families that fall under these categories will be automatically registered.

The non-filer tool features a user-friendly design to facilitate registration for the program. You will be required to provide the following personal information: Full name, date of birth, current mailing address, email address, Social Security number (or tax ID number) for yourself and those dependent on you, bank account number, bank account type, and routing (if applicable), and the Identity Protection Personal Identification Number (if applicable).

Once the required information is entered, the non-filer tool will automatically determine your eligibility. If you qualify, the tool will automatically issue advanced payments. The first payment of the expanded Child Tax Credit will be made on July 15. After that, payments will be made on the 15th of each month, allowing families to plan their monthly budget with certainty.

Significance & Expected Results

The introduction of the new child tax credit tool is part of the IRS and Treasury efforts to help more families receive advanced Child Tax Credit payments. The Biden administration is also expected to extend the program beyond the end of this year under the American Families Plan.

Treasury Secretary Janet Yellen said in a statement, “At Treasury, our goal is to make sure that every American can get the relief funding they need as simply as possible. We know working families cannot put off paying for doctor’s visits or grocery bills, and this new tool will help more people get their tax credit every month, starting in July.

The efforts are directed towards bringing down the childhood poverty rate. Some economists predict that the American Rescue Plan might lift more than five million children out of poverty this year.

In addition to the rollout of the non-filer tool, the Treasury has also analyzed IRS data to locate children who may be eligible to be claimed for the program but have not been claimed on a recent tax return. The data will enable the organizations to expand their outreach and encourage non-filers to register for the monthly Child Tax Credit payments.

To further facilitate families, the IRS has created new tools for the Child Tax Credit, including the following:

  • Child Tax Credit Update Portal: The portal allows taxpayers to view their eligibility, view status of advance payments and unenroll from getting advance payments.

For more information on tax credits and incentives or accessing the Child Tax Credit payments, connect with Windes.
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