New Income Help for Families with ChildrenPosted on: May 27, 2021
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A new federal act has increased the amount of the Child Tax Credit and will provide new income for families with children.
Eligible parents can now receive up to* 50% of their child tax credit spread out in six payments from July to December. The other 50% will be paid as a refund when the 2021 return is filed.
No application is needed, and there are no agencies to deal with if all of your children:
- are listed on an income tax return you filed for the year 2019 or 2020 or
- if you got IRS stimulus payments for all of the children.
Income limits apply, but they are very generous.
This is from the “American Rescue Plan” that Congress passed in March. The income is called the Child Tax Credit for 2021. It is being paid out starting in July 15, 2021.
How much are the Child Tax Credits for 2021?
- $3,000 per qualifying child between the ages of 6 and 17
- $3,600 per qualifying child under age 6
The six advanced payments from July to December will be approximately* $250-$300 a month, per eligible child. The rest of the credit ($1,500-$1,800) will be added to your 2021 tax return.
*The number of advanced payments you can receive and the amount of these payments will be based off of your 2020 tax return (or 2019 return if you haven’t filed for 2020 or if your 2020 return is still being processed). The amount of the tax credits will be reduced for those who earn more than $75,000 a year, heads of household who earn over $112,500 a year, and married couples filing a joint tax return with an income over $150,000.
Who is eligible for the Child Tax Credit?
To be eligible, you must:
- Have a child who is 17 or younger at the end of 2021
- Be responsible for at least half of the financial support of the child and they must live with you for at least half of the year.
- Divorced or separated parents that the child does not usually live with can only get the funds if the domiciliary parent agrees and signs the IRS Form 8832. That other parent then loses eligibility for the funds.
How do I apply for the Child Tax Credit?
You do not need to take any action now other than to file your 2020 tax return, if you have not already done so.
The IRS will be using the information on your 2020 return, or your 2019 return if a 2020 return has not been filed.
The IRS has already begun sending out letters to eligible families letting them know that they qualify based on past tax returns.
What if I did not file a 2019 tax return?
If you earned enough income in 2020 to file a tax return, you should file as soon as possible. The IRS suggests filing electronically and setting up direct deposit to help get the advanced payments faster.
The Volunteer Income Tax Assistance Program (VITA Program) provides free tax preparing and filing. You can dial 211, call 504-822-5540, or email firstname.lastname@example.org for help.
If you did not file a 2019 return and did not earn enough income to file a 2020 tax return, you can use the Advance Child Tax Credit (ACTC) non-filer portal available on this website.
The Southeast Louisiana Legal Services Low-Income Tax Clinic cannot electronically file your tax return.
Do I have to receive the advanced payments if I would prefer to get the money as a tax refund next year?
No. If you do not want to receive advance payments and prefer to get the money all at once after you file your 2021 taxes, you can choose that. You can also update the IRS about any change in your income, filing status, or the number of qualifying children.
More details on how to take these steps will be announced by the IRS soon. Updates will be available at this website.
Are these changes permanent?
No. So far, these changes are only for the 2021 tax year.
Will getting the advanced payments affect my benefits from other programs, like SNAP (Food Stamps)?
No. The tax credit does not count as income for federally-funded programs, so will not affect benefits like SNAP, Medicaid, Children's Health Insurance Program (CHIP), and public housing programs. It will also not count towards your resource limit for the year for these programs.
Can my advanced payments be garnished if I owe money to a creditor?
Yes. The advance payments can be garnished by private creditors.
Will my advanced Child Tax Credit payments be reduced if I owe taxes from previous years?
No. The six advance Child Tax Credit payments will not be reduced for overdue taxes from previous years or other federal or state debts that you owe.
However, if you receive a refund when you file your 2021 tax return, any remaining Child Tax Credit amounts included in your refund may be used to pay back tax debts or other federal or state debts you owe.
What should I do if my tax return is rejected?
Be on the lookout for scammers who try to use the Child Tax Credit payments as a way to steal your personal information and money. The IRS will not contact you by email, text, or social media to request your personal or financial information. Also, watch out for emails with attachments or links claiming to have special information about advance Child Tax Credit payments or your refund.
If you receive a suspicious IRS-related email, you can check out this website for more information: Report Phishing and Online Scams.