Most US families, totaling close to 60 million children, have received child tax credit payments. But according to a report published by the Center on Budget and Policy Priorities, some 4 million children in low-income households might miss out on the child tax credit this year. The reason being, the IRS doesn't have information to issue checks to these families. The payments are based on your latest tax return.
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In previous years, low-income families or parents without earnings may have received only a portion of the credit, if any at all. But this year's child tax credit means that more families qualify for advance payments, even if they earn too little to file taxes. To register for this year's advance monthly payments as a nonfiler, you can file a tax return. [ call our office, we can assist you with the process]
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Each monthly payment is an advance on part of the total credit, which is up to $3,000 or $3,600 per child, depending on age. Families that don't receive monthly payments this year will get the full amount when they file a tax return in 2022. The next payment will be sent on Aug. 13, and families can get up to $300 for each child each month through December.
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The IRS has an online free tool to help families that don't normally file income tax returns to enroll in this year's child tax credit program. The tool isn't for families who already filed -- or plan to file -- their 2019- or 2020-income tax return. The IRS will use those tax returns to determine eligibility and disburse the coming payments to qualifying families.
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The free "tool" is designed to allow the poorest families and those experiencing homelessness to register with their name, address and Social Security numbers. Individuals will be able to notify the IRS about any of their qualifying dependents and can provide their bank information for direct deposit of the payments once they start.
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You may find using the online IRS tool not too easy to use. It all depends how comfortable you are with filling out online forms. The IRS does recommend using a laptop or desktop computer, but NOT a phone (the platform on mobile devices is not as easy to read). Users will also need an email address, a solid internet connection, their filing status and other tax-related information, which isn't typically available for nonfilers. For now, it's only accessible in English, though the instructions are available in multiple languages.
Who Shouldn't Use The Online IRS Tool
The IRS says you shouldn't use the new nonfiler online tool if you already filed a 2020 income tax return or if your adjusted gross income, or AGI, exceeded $12,400 ($24,800 for a married couple). It also says you can't use the tool if your main home is outside the US, if you or your spouse can be claimed as dependents or if you are requesting an advance child tax credit for a child born in 2021. (However, you can use the tool if you need to claim a recovery rebate credit.)
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How can parents use the IRS tool to opt out of monthly payments?
Families may unenroll from the child tax credit to defer the advance monthly checks and instead receive a lump sum of the money during tax time next year. You can unenroll at least three days before the first Thursday of each month. The sooner you unenroll, the better because it can take up to seven days for your request to process. In September, you'll be able to re-enroll if you change your mind.
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You can call our offices to get the deadlines for unenrolling from the advance monthly payment program.
How do child tax credit payments impact next year's tax return?
The child tax credit payments are advances on next year's tax refund for eligible parents. You get half of the money over the course of seven payments in 2021 and 2022. If for whatever reason you receive more money than you're eligible for, you'll need to pay the IRS the difference based on your tax return when you file in 2022.
However, there is a repayment protection program to help low-income families that may not be able to repay the extra money.
Other ways to use the IRS child tax
credit tools
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We expect changes to the IRS website throughout the summer. For example, the IRS plans to add a Spanish version of the online tools. You can now view your child tax credit payment history and update your direct deposit details in the update portal. Later on, you'll be able to change your mailing information and other household details through the update portal.
For more information about child tax credit, call us for assistance.
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