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IRS child tax credit: is the web portal the best way to apply, what other options do I have?

If you filed a 2020 tax return or used the IRS Non-Filer tool you are automatically signed up to receive the 2021 Child Tax Credit. Here’s what to know.

If you filed a 2020 tax return or used the IRS Non-Filer tool you are automatically signed up to receive the 2021 Child Tax Credit. Here’s what to know.

Starting 15 July, the Internal Revenue Service will begin sending eligible families advance payments on the 2021 Child Tax Credit. Any parent or guardian who filed their 2020 tax return or used the IRS Non-Filer online tool should be automatically signed up. But if you still haven’t done either you’ll want to take action now, here’s what to do.

The IRS has set up three helpful online tools for families to use to manage their payments from the 2021 Child Tax Credit, check eligibility and register for the payments. You will only need to apply for the advance payments if you still haven’t filed a 2020 or 2019 tax return nor used the Non-Filer tool last year to claim your $1,200 stimulus check payment or this year’s rebooted version to sign up for the 2021 Child Tax Credit.

Also see:

How to apply for the 2021 Child Tax Credit advance payments

To check if you are signed up you can use the IRS Manage Payments online tool which also allows you to unenroll and update your information. If you aren’t signed up for the payments you can see if you are eligible through the IRS Eligibility Assistant online tool. Once you’ve seen that you are eligible but not yet signed up and you meet the requirements you can use the IRS Non-filer Sign-up Tool. In order to use this online tool you must meet the following requirements:

  • You are not required to file a 2020 tax return, didn’t file one and don’t plan to; and
  • Have your main home in the United States for more than half of the year.

If you are required to file a 2020 tax return, you are urged to do so immediately. If you owe money to the IRS, the longer you wait the higher the fines and penalties will be.

Families that choose to receive the payments will get half the tax credit paid in monthly installments falling on the 15th of each month, except August when the payment will be on the 13th, through the end of the year. Those who would rather receive the up to $3,000 per child between the ages of 6 and 17 or up to $3,600 for each child under age 6 as a lump sum can use the Manage Payments online tool to opt out of the monthly payments. Although it is too late to stop the payment for July, you can stop the five remaining payments before the next deadline.

Who is eligible to receive the enhanced Child Tax Credit?

Under the new legislation, individuals will qualify for the full value of the Child Tax Credit so long as their annual earnings are below $75,000; or a joint income of up to $150,000 for married couples, widows, and widowers and $112,500 for heads of household. If household earnings surpass these limits, a reduced credit will be distributed. For every additional $1000 in income, the credit's value will be gradually phased out $50.

The IRS will determine eligibility based on 2020 tax returns or 2019 returns if a taxpayer’s 2020 tax return hasn’t been filed and processed yet. To be eligible, a taxpayer must have their main home in the US for more than half the year and care for the dependent for at least half of the calendar year. The IRS urges taxpayers with children to file a 2020 tax return as soon as possible, if they haven’t already, to get the correct amount from the tax credit. This includes those with no income who are eligible to receive the credit but are not normally required to file taxes. The agency also recommends using direct deposit to receive their refund and the advance payments faster.

How much will families receive per child?

Eligible families can receive up to $3,000 per child between the ages of 6 and 17 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.

Under the American Rescue Plan, taxpayers can still claim a nonrefundable credit of up to $500 toward the child tax credit for 18-year-old dependents and dependents between the age of 19 and 24 who are attending college full-time. There won’t be an advanced payment on this credit.

Why you might have to return the advance payments

With advance payments on last year’s information, or even from 2019, there are sure to be some overpayments. Although the legislation creates a “safe harbor” for lower- and moderate-income taxpayers, above a threshold, taxpayers would need to repay any overpayments they received.

Households with adjusted gross income at or below $40,000 on a single return, $50,000 on a head-of-household return, and $60,000 on a joint return won't have to repay any overpayments on the Child Tax Credit that they receive. However, those households making at or above $80,000, $100,000, and $120,000, respectively, will need to repay the entire amount of overpayment. For households with earnings in between these thresholds, they will need to repay a portion of any overpayments received.