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Saturday, May 15, 2021

Child Tax Credit Schedule: Will The Monthly Payment Of Around $300 Truly Help?

The child tax credit will be sent by the IRS in the form of a regular payment, possibly monthly. The payments will be sent in two stages. Half of the payment will be sent periodically starting July 2021 to December 2021. The rest will be paid as a tax refund against returns filed in 2022. Should you go for a monthly payment or collect the total amount against tax returns in 2022?

So if you have a child aged below 6, you can expect a total of $3,600 if you meet the other criteria. So you can expect $1,800 between July and December this year. There is the possibility of the payment being paid out at least till 2025 as per President Biden’s plans for an extended child tax credit payment.

Qualifying For The Child Tax Credit

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You will get the payment depending on certain factors. Your income, the qualification of your dependent, and the shared custody position are all issues that decide the amount and eligibility of your child’s tax credit payment. There are separate rules for older children and babies born in 2021.

 For children aged between 6 and 17, the total amount is $3,000. So if you have a child between 6 and 17, you will get $250 every month between July and December 2021. The balance of $1,500 will be part of your tax return in 2022.

Those aged 18 to 24 will get a one-off check of $500 if they are students.

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The full amount is for individuals and families earning within a certain limit. It is $75,000 for individual tax filers, for the head of households the amount beyond which the credit phases out is $112,500. For married couples filing jointly, the phase-out begins after earnings cross $150,000.

The payments start to decrease by $50 will every increase of $1,000 in AGI.

When Do The Payments Start?

Though an exact date hasn’t been given out by the IRS, the payments are set to start in July and continue through December 2021. Neither is it clear if the child tax credit payments may be divided into groups and sent out in phases.

But it is confirmed that the payments will be given out monthly till December.

Opting Out Of The Monthly Payment For The Child Tax Credit

child tax credit
Child Tax Credit

This is the option of collecting the total payment in one check as a refund for tax returns for 2021.

Once the child tax credit portal is opened in July, you will have the choice to opt-out of the monthly payment mode and collect the payment in one go. This will also save you from the hassle of payment and tax refunds owed to the IRS.

The portal will only be ready after the end of the tax season. Once the portal starts, you can log into it and update changes in circumstances, like the birth of a baby in 2020 or 2021.

Children born in 2021 also qualify for the CTC payment of a maximum of $3,600.

Mode Of Payment Of The Child Tax Credit

The way you get your CTC payment is most likely to be dependent on the payment method of the third stimulus check. But we can be sue only after we receive clarification from the IRS.

So if you received your stimulus payment by check or direct deposit, the same might happen for the child tax payments. If you get your Social Security payments through the Direct Express card, it is more than likely you will get future payments, including the child tax credit payments in the same way.

Rules for Parents Who Share Custody

Separated parents were able to collect the first and stimulus check for children separately. They both ended up getting the same amount from the IRS. This was only possible if they filed in different years, say odd and even.

This loophole was plugged in by the IRS for the third stimulus check. Only one parent can claim the stimulus check in one year.

Payment To Be Automatic If You Have Filed Your 2020 Return

It will not be necessary for you to file a revised return to claim the child tax credit payment. The payment will be routine for those filing the tax return before the tax deadline on May 17.

Non-filers will also have to file the 2020 return. This will be beneficial to you also. The IRS will have updated information of all your dependents to send the stimulus check and other payments.

Will I Have To Refund If The IRS Gives Me More?

Unlike for the third stimulus check, you will have to refund any amount you receive above the correct amount. This could happen if both parents erroneously receive a child tax credit for the same child.

If your tax returns for 2021 reveal that you were not entitled to the amount you received, you will have to refund the amount.

Is The CTC Different This Time From Previous Payments?

There is confusion due to the presence of the word ‘credit.’ It means that your taxes payable in 2022 will be reduced through credit into your account.

So you either receive a tax refund or your taxes are reduced by the amount declared as your child tax credit. But the system of monthly payments has been started to send the payments earlier to the American citizens.

Reasons You Should Avoid The Monthly System Of Payment

child tax credit

You have the option of collecting your child’s tax credit payment in one go instead of the monthly payments. This will help you get a single large payment as a refund or tax credit next year. You could invest the amount for some future expenses like your child’s higher education.

You can avoid the hassle of updating information in the child tax credit portal scheduled to be loaded by the IRS in July 2021.

There is also the possibility of refunding excess payments and you would not want that to happen.

So once you opt out of periodical payments, the IRS will not give any payments till the 2021 tax return filed in 2022. This is a fair warning for those who need the money to survive through to next year. To stop the monthly mode of payment. You would have to file your taxes before the May 17 deadline and update your information in the portal.

Using The Child Tax Credit Portal Uploaded By The IRS

You can use the child tax credit portal uploaded by the IRS. If you do not have internet access, the IRS has said there are paper forms.

The portal will be quite handy in updating every information with the IRS. That includes the birth of a new baby in 2020 or 2021 or the addition of another dependent.

There are still no updates if you can change information once you upload it on the child tax credit portal.

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