Starting in July, millions of U.S. families will receive as much as $300 a month per child under the Biden administration’s bold effort to help struggling families. And the IRS recently launched several tools to make the daunting process go as smoothly as possible.
Under the American Rescue Plan, the child tax credit was temporarily expanded for the 2021 tax year to an annual total of $3,600 for children 5 and younger and $3,000 for those 6 through 17. The credit for qualifying children is fully refundable, which means that taxpayers can benefit even if they don’t have any earned income or don’t owe income taxes.
The IRS is paying out the money in advance to help families get funds faster — because the credit is for 2021. Overall, the money distributed this year will be half the amount parents are projected to be eligible to claim when they file their 2021 federal returns next year. Parents of children 5 and under can receive up to $300 a month. For parents of children ages 6 through 17, it’s up to $250 a month.
The expanded portion of the credit begins to phase out at a modified adjusted gross income above $75,000 for singles and married people filing separately, $112,500 for heads of household and $150,000 for couples. The phaseout reduces the credit by $50 for each $1,000 (or fraction thereof) by which your modified adjusted gross income exceeds these income thresholds.
To facilitate the distribution of the payments, the IRS has created three online portals. The first, launched June 14, is an updated version of the online non-filer tool it used last year to help people claim stimulus payments. The tool was built to provide a way for eligible people who don’t file tax returns to give the agency the basic information required to issue the monthly payments.
This week, the IRS brought online two additional tools for families. One portal, the Advance Child Tax Credit Eligibility Assistant, helps families quickly determine whether they qualify for the advance credit. The second tool, the Child Tax Credit Update Portal, allows families to opt out of receiving the monthly payments.
Here’s what you need to know about using the portals created for the advance payments.