AMERICAN RESCUE PLAN

$3,000/$3,600 child tax credit stimulus: when is IRS opening the online portal for registering?

Parents can look forward to a little extra cash starting in July, but those that would rather wait will be able to tell the IRS to send the money next year.

$3,000/$3,600 child tax credit stimulus: when is IRS opening the online portal for registering?
INA FASSBENDER AFP

The American Rescue Plan (ARP) includes a valuable enhancement to the Child Tax Credit that will send, if parents want, monthly direct payments of up to $300 per child. The IRS is setting up an online portal that they can use to update information or opt out of the advance payments to delay receiving the tax credit.

The changes to the Child Tax Credit are currently only for the 2021 fiscal year. However, depending on the final draft of the American Family Plan they could be extended until 2025, but progressive members of Congress would like to make the enhancements permanent.

Parents can use an IRS online portal to update status

Those with eligible children that filed their 2020 tax return this year will automatically be signed up to participate in the new child benefit program. The IRS urges taxpayers to file a tax return this year, even if they aren’t required to, in order to take advantage of the 2021 Child Tax Credit and other tax provisions in the ARP. When the IRS has processed your tax return, and if no further action is taken, the agency will begin sending advance monthly payments 15 July to eligible families for the tax credit. The payments will continue through December giving parents half the 2021 Child Tax Credit, the other half can be claimed on 2021 tax returns next year.

Some families may want to opt out of the advance payments on the tax credit. Perhaps to wait for a lump sum payment next year or to avoid an overpayment due to circumstances changing from the time the 2020 tax return was filed. Other families may want to inform the IRS that they’ve had a baby or adopted a child so that they can begin receiving the payments. So that parents can inform the IRS of the changes or the desire to opt out, the agency is setting up an online portal which should be up and running by 1 July.

Changes to the Child Tax Credit pre-2021

First established in 1998, the Child Tax Credit has been a tool to lift children out of poverty. Since it was created it has been modified several times to increase the amount of, and expand the eligibility for the credit. The last modification came in 2017 when the credit was expanded from $1,000 to $2,000, and $1,400 of that was made refundable, known as the Additional Child Tax Credit (ACTC), but with conditions limiting the amount that a taxpayer could claim of that refundable amount based on earnings.

Those earnings limitations set a floor and a ceiling determining how much a taxpayer could claim from the ACTC. For an individual taxpayer, they needed to earn, through work, a minimum of $2,500 to begin receiving a portion of the refundable credit. The credit would then phase out for a single filer with income above $200,000, significantly above the previous $75,000. The amount a taxpayer is eligible for phases out at $50 for each additional $1,000, or portion thereof, earned.

Parents can claim the tax credit for children 16 and younger, older dependents are eligible for a $500 credit. The changes made in 2017 will expire in 2025, the same year to which President Biden wants to extend the 2021 enhancements.

2021 Child Tax Credit

The ARP greatly enhanced the Child Tax Credit, but only for the 2021 fiscal year. Eligible families can now receive up to $3,000 per child between the ages of 6 and 17, up from 16, at the end of 2021. Each child under age 6 at the end of 2021 could qualify for up to $3,600. The credit is fully refundable so if a family owes less than the amount of the credit, they will receive the excess as a tax refund. For more information click here.