What is the Expanded Child Tax Credit?
If you have children under the age of 18, you may be interested in the expanded child tax credit.
The Biden administration has started sending out letters to families announcing the payments of the expanded child tax credit to support them during the pandemic.
How is it calculated?
Shortly, families with children under 6 years old will receive up to $3,600 for each child, and families with children ages 6 to 17 will receive $3,000 for each child. Your 18-year-old, as well as students aged 19 to 24 who are enrolled full-time in College, are eligible to receive a one-time $500 check. For children under 17, half of this amount will be sent out monthly from July to December, and the other half will be sent to families when they file their taxes next year. If you are eligible, there is no limit to the number of children that may receive the tax credit: it does not matter whether you have 1 or 7 children.
How do you know if you qualify for the advance payments of the child tax credit?
Eligibility depends on several criteria: how much you make, how you filed your tax return, and where you live.
Your income will impact the amount you receive. Singer filers who earn less than $75,000 per year, heads of household who earn less than $112,500 per year, and married couples earn together less than $150,000 are eligible to receive the full amount. If you earn more than this, it does not necessarily mean you are not eligible. It simply means that for every $1,000 you earn over the limit, the amount you may receive diminishes by $50.
You must have claimed the tax credit on your 2020 tax return, or sent information to the IRS in the “Non-Filers: Enter Payment Info Here tool” in 2020. This is a requirement and you won’t qualify if you did not claim it on your tax return or sent the information to the IRS.
If you are only hearing about the tax credit and think you might be eligible based on your income, you can still try to become eligible by entering your information on the Non-Fillers tool on the IRS website.
You qualify if you lived for more than half of 2019 or 2020 in any of the 50 states, D.C., or a U.S. military facility. You do not qualify through the IRS if you lived on a U.S. territory, but you may be eligible through the U.S. territory tax agency. You do not qualify if you lived abroad for more than half a year in 2019 and 2020.
What you should consider before opting in or opting out of the tax credit
You can opt-out of early payment. This way, you won’t receive the monthly payments, instead, you will receive the full amount during the tax period in 2022. You should make sure that you are eligible for the early payment, otherwise, you might have to repay the IRS. If you decide to opt out of the early payments, you must do so 3 days before the first Thursday of the following month.
The IRS’ new online portal allows you to update your information
The IRS has created a new online portal to help families update their information, such as if you are pregnant and your baby will be born in 2021. The baby is eligible for the expanded child tax credit. Children adopted in 2020, as long as they are U.S. citizens, are also eligible.
The portal also helps family check their eligibility, manage the payments, or opt out of them. You can also update general information such as mailing address, marital status, income, or your dependents.
If you are waiting for the payment, or are unsure whether you should opt-out of the tax credit, contact your experienced attorneys at EPGD Business law.
