|
Getting your Trinity Audio player ready...
|
If you see then this time it’s a historic move of IRS to give more credit than previous years. IRS providing relief to those families who comes in $150,000 (MFJ) AGI and as of July 15th, these families are receiving monthly payments of $250 or $300 per child without having to take any action. The Child Tax Credit will help all families to get more benefit.
First of all, we will understand what Child Tax Credit is and what some conditions to qualify for CTC are:
- The child tax credit is an income tax credit of $3,000 (As per 2021) per eligible child.
- They are qualified dependents under the age of 17 who are U.S. citizens, U.S nationals, or U.S. resident aliens.
- This tax credit is phased out for families who come in high income level, as it was a move to help low to middle level income workers.
- A dependent that doesn’t have the required SSN or over age 17 may be eligible to be claimed for the credit for other dependents.
The expansion of the CTC for 2021 has important move of IRS to improve economy after Covid19. When the child tax credit was first introduced, it was a move to benefit low and middle level income families. Since its inception in 1997, it has benefited these taxpayers. If income levels increases, the credit is phased out gradually. Over the years, frequent amendments increased the credit amount and provided tax refunds that were limited. At one time, these tax refunds were not issued to taxpayers with three or more children.
These types of changes to the CTC are going to help many taxpayers to get advance payments of the credit beginning this tax season. The IRS will pay half of the total credit amount as advance monthly payments starting from July 15. Taxpayer will claim the next amount when they file their 2021 income tax return. These amendments applicable for year 2021.
This time it is $3,000 to $3,600 per child. A significant increase in credit as per last year provided
Updated limit:
- $3,000/child 6-17 years old
- $3,600/child under 6 years old
- Eligible families will get the
Here are further details on these payments :
- Families will get the direct deposit payments in their accounts beginning from, July 15 2021. If families who are receiving payment by paper check, they should remember that it takes time to deliver check by mail.
- Payments issued to families who filed their 2019 or 2020 income tax returns to IRS.
- Tax returns filed by June 28 are reflected in these payments. This includes people who do not typically file a return, but in 2020 if they registered for Economic Impact Payments by using the IRS Non-Filers tool or in 2021 successfully used the non-filer registration tool to get Advance CTC, also on IRS.gov.
- Payments are automatic. Other than filing a tax return, including a simplified return from the Non-Filer Sign-Up tool, families not require to do anything if they are eligible to receive monthly payments.
- Eligible taxpayers, who did not get a July payment and are, getting their first monthly payment after July, 2021 will still eligible to receive their benefit in the year. It means that the entire payments are going to be issue in next five months, instead of 6, making each monthly payment larger.
- Additionally, the IRS is amending regarding the advance CTC payments for families where the parent(s) have an Individual Taxpayer Identification Number (ITIN) and the qualifying dependents have a SSN. They will receive updates of the July payment in August last or next month.
Low-income families can still sign up
Still it’s on time for eligible families to check in for advance CTC payments. The Internal Revenue Service requested people who normally are not required to file a tax return to use the options available on IRS.gov. These options can help to work out eligibility for the advance CTC or help people to file a simplified tax return to check in for these receipts as well as stimulus. People can get these benefits, albeit if they do not work and albeit if they receive no income.
Families can stop payments anytime
Families have permission to stop payments anytime, even after payments begin. They do that by using the drop out feature in the Child Tax Credit Update Portal. Eligible families who are going to stop these payments will still receive the rest of Child Tax Credit in their 2021 federal income tax return next year. To stop all payments starting in September and the rest of 2021, they must drop out by 11:59 p.m. ET on August 30, 2021.
For married couples, each spouse must drop out separately. If they each choose to drop out, they will receive no monthly payments.
The drop out feature also can be helpful to any taxpayer that no longer qualifies for the CTC or think that they will not get eligible once they file their 2021 return. This might happen if, for instance, somebody else, like an ex-spouse or another loved one, qualifies to claim their qualified child as dependents in 2021.
Are Child Tax Credit Payments Taxable?
If you are receiving monthly CTC payments, the IRS is not going to tax that amount when you file your income tax return next year. These payments are an advance of the CTC that you will claim on your 2021 tax return – they are not ‘taxable income’.
They still can impact your next year’s tax due or tax refund. If you have advance payments of child tax credit they will be deduct from the credit amount you are going to claim on your 2021 income tax return. That will calculate your 2021 CTC less, which suggests either your tax due are going to be high.
Support from IRS :
- The IRS continues to boost awareness of the expanded CTC. The IRS stir up partners and community groups to share knowledge and use available online tools and toolkits to assist non-filers, low-income families and other underserved groups check in to receive the advance Child Tax Credits also as Economic Impact Payments. Taxpayer can check their eligibility for these payments by using the new advance CTC Eligibility option.
Want to know more about Child Tax Credit or planning to outsource your accounting and tax preparation services. Connect with our team call us on +1 929 254 6300 or email us on contact@crspconnect.com
