Yesterday the IRS has launched a new portal to help you manage prepayments on the recently expanded child tax credit of up to $ 3,600 per child. The tax credit is complicated – as it is based on your estimated 2021 income – so be sure to use the portal to update your income and child dependency status (or opt out if you’d rather get a lump sum credit when filing your taxes) ). Here’s what you need to know.
How much is the child allowance worth?
The American Rescue Act increased the child tax credit from a maximum of $ 2,000 to $ 3,600 per child (but this varies based on income), with half that amount on the 15th month through the end of the year, either as a check or as a direct deposit .
These prepayments are limited to a maximum of $ 300 per month for each eligible child ages five and younger and $ 250 per month for children ages six to 17. This Lifehacker post provides more details on how the income limits work.
What does the Child Tax Credit Update Portal do?
For now is the Child tax credit update portal checks your eligibility for the payments and enables you (if you wish) to refuse to receive the monthly payments. However, per CNET, the portal will also be updated during this summer so that you can update your bank account information and mailing address and most importantly your income or Custody status.
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Why is that important? Because the prepayments are based on estimates based on your 2019 or 2020 income, your actual 2021 income may differ from what the IRS expects. For example, you could get a raise this year that would exclude you from being credited, forcing you to repay the prepayments later when you file your 2021 tax return. On the other hand, you may have had a child in 2021 that could entitle you to receive more cash as part of your prepayments. By keeping your income and child status updated, you can claim the money owed you with no surprises.
The opt-out option can be useful if you already know that your 2021 income will exclude you from the advance payment or another parent is already claiming your children as dependent.
Two other child tax credit tools to keep in mind
Yesterday the IRS did one too Child Child Tax Credit Eligibility Assistant, a questionnaire-like tool that can help you determine whether you are eligible for child tax prepayments.
Since the IRS also uses the income listed on your previous tax returns to determine if you qualify for the child tax credit, a Registration tool for non-filers was created for low income earners who typically do not file an income tax return (not required if you are making less than $ 12,000). For more information on how this tool works, see check out this Lifehacker post.
