The American Rescue Plan offers American families a bigger and better child tax credit for 2021. For this year only, the credit amount for many families is increased from $2,000 per child to $3,000 per kid ($3,600 for children under age six), 17-year-olds qualify, and the credit is fully refundable.
One additional major element of the new child tax credit regime requires the IRS to make advance payments of the credit each month to qualifying families. The advance payments will account for half of a family's 2021 child tax credit. The IRS will issue these monthly child credit payments to eligible families on July 15, August 13, September 15, October 15, November 15, and December 15. Most payments will be directly deposited into bank accounts. Families for which the IRS does not have bank account information could receive paper checks or debit cards in the mail.
The amount a family receives each month will vary based on the number of children in the family, the ages of the kids and the amount of the family's adjusted gross income. Families who qualify for the full $3,000 or $3,600 credit will see checks of $250 or $300 per child for six months. Families with higher incomes who qualify for the $2,000 credit will get monthly payments of $167 per child for six months. (Calculate your monthly payment using Kiplinger's 2021 Child Tax Credit Calculator.)
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The IRS will base eligibility for the credit and advance payments, and calculate the amount of the advance payment, based on previously filed tax returns. It will first look to your 2020 return, and if a 2020 return has not yet been filed, the IRS will look to your 2019 return. Thus, most eligible families do not have to do anything to get these payments, provided the IRS has your 2019 or 2020 return information and you don't need to change anything to reflect current circumstances.
Child Tax Credit Non-Filer Sign-Up Tool
Families who didn't file a return for 2019 or 2020 because their income is below the threshold required to file a return can still get the advance child tax credit payments, but they'll have to first supply the IRS with some information. The easiest way to do this is to use the IRS's Non-Filer Sign-Up Tool on the agency's website. If you want your payments directly deposited into your bank account, which is faster than getting a paper check, you can also provide your account information through the tool.
The Non-Filer Sign-Up Tool is intended for people who were not required to file a tax return for 2019 or 2020. You should not use it if you filed a 2019 or 2020 return or if you used the IRS's online tool for non-filers in 2020 to provide information to the tax agency for purposes of qualifying for stimulus payments.
If you use the Non-Filer Sign-Up Tool, you'll be asked to provide your:
- Full name, current mailing address, phone number and email address;
- Date of birth;
- Social Security numbers (or other tax identification numbers) for you and your dependents;
- Bank account number, type and routing number if you want your payments by direct deposit; and
- Identity Protection Personal Identification Number (IP PIN), if you have one.
Filing Simplified Tax Returns to Get Child Tax Credit Payments
The IRS hopes most non-filers will go online and use its Non-Filer Sign-Up Tool, but it also announced alternative procedures for filing simplified tax returns. The IRS will accept simple returns for 2020 on Form 1040 filed electronically or on paper. But you don't have to fill out the entire return. Instead, you will only need to include your filing status and identifying information, provide information about your children and dependents, and follow the rest of the IRS's instructions. Alternatively, if you had no adjusted gross income for 2020, you may electronically file a regular Form 1040. For a complete rundown of the IRS instructions for simple returns and zero AGI returns, see Child Tax Credit 2021: How to Get Monthly Payments if You Don't File Tax Returns. Again, don't use these alternative filing procedures if you used the IRS's online tool for non-filers in 2020 to provide information to the tax agency for purposes of qualifying for stimulus payments.
More Child Tax Credit Tools Are on the Way
The American Rescue Plan also requires the IRS to develop an online portal so that you can update your income, marital status, number of qualifying children and direct deposit information. If your circumstances change in 2021 from your last filed federal tax return, and you believe those changes could affect the amount of your child credit for 2021, you will be able to go onto the Child Tax Credit Update Portal once it is up and running and update it for the correct information. You will also be able to check on the status of your advance payments.
Additionally, people who want to opt out of the advance payments and instead take the full child credit on their 2021 return will be able to do so through the online Child Tax Credit Update Portal. The IRS is also launching an interactive Child Tax Credit eligibility assistant online tool to help families determine whether they qualify for the advance payments. The IRS expects to launch the Child Tax Credit Update Portal and the Child Tax Credit eligibility assistant in the next few weeks.
For more information on this year's child tax credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.