To help working parents overcome the financial challenges brought on by the pandemic, the American Rescue Plan expanded the Child Tax Credit (CTC) to provide relief to more families than ever before. For tax year 2021, the CTC increased from $2,000 per qualifying child to:
- $3,600 for children ages five and under at the end of 2021
- $3,000 for children ages six through 17 at the end of 2021
Eligible families started receiving monthly automated payments of $250 or $300 per child on July 15th, without having to take any action. But some still haven’t received a credit, and you may be wondering if you’re missing out on money you deserve.
Am I qualified?
The rules are complex. According to the IRS, to qualify for advance payments of the CTC, you (and your spouse, if you filed a joint return) must have:
- Filed a 2019 or 2020 tax return and claimed the CTC on the return
OR
- Provided your information in 2020 to receive the Economic Impact Payment with the Non-Filers: Enter Payment Info Here tool
OR
- Provided your information in 2021 with the Non-Filer: Submit Your Information tool
Additionally, you must meet these qualifying conditions:
- Lived in a primary residence in the United States for more than half the year (the 50 states and the District of Columbia) or filed a joint return with a spouse who has a primary residence in the U.S. for more than half the year
- Have a qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
- Made less than certain income limits. The CTC may be reduced to $2,000 total per child (or phased out completely) if your modified adjusted gross income (MAGI) in 2021 exceeds:
- $150,000 for married taxpayers filing jointly and qualifying widows/widowers
- $112,500 for heads of household
- $75,000 for other individual taxpayers
Who is a qualifying child?
For 2021, a qualifying child is defined as one who is under age 18 whom the taxpayer can claim as a dependent. (In other words, it’s a child related to the taxpayer who generally lived with the taxpayer for at least six months during the year.) The child must also be a U.S. citizen or national, or a U.S. resident.
Clear the confusion
If you’re among the unsure, the IRS recently launched a new online tool — the Advance Child Tax Credit Eligibility Assistant — that can help you determine if you qualify for the CTC and the monthly advance payments. This tool is particularly useful if your family doesn’t normally file a federal tax return.
Once eligibility is determined, you can take the next step and register for the CTC payments using the Non-Filer Sign-up tool. And for your convenience, the Child Tax Credit Update portal allows you to view information about payments and opt out of receiving payments if you wish.
Ask a CPA
If you have any questions regarding your previous tax returns or eligibility, don’t hesitate to reach out to the professionals at Magone & Company.