Earlier this year, the American Rescue Plan (ARP) was announced, including some temporary updates to the child tax credits available for many parents. Under the ARP, eligible parents of dependent children can take a tax deduction of up to $3,600 per child, depending on the child’s age and household income.
Part of this tax deduction is currently planned to be distributed to parents in the form of monthly payments from the IRS. For every child under the age of 6, parents will receive $300 per month starting on July 15 and ending on December 15. For children age 6 to 17, parents will receive $250 per month. Any remaining amount on the child tax credits will be eligible to be taken during the regular tax filing season.
The child tax credit update portal
The IRS has released a website where parents, including eligible non-filer parents, may make their designations concerning the child tax credits and scheduled deposits. This includes updating bank account information for direct deposits, even if previous economic stimulus payments were sent via check.
For parents that want to forego the advance payments and take their child tax credit in one lump sum during their tax filings, you may opt-out using this portal. The deadline to opt-out for the first payment was June 28. If you opt-out after that deadline, you will still receive the first payment if you qualify. In addition to personal preference, filers may want to opt-out of these payments because:
Now would be a good time to discuss with a tax professional any benefits or drawbacks to accepting the monthly advance payments to the child tax credit.
Note: Parents who are married couples filing jointly must BOTH opt-out of receiving the payments, or you may still receive a partial payment.
Who will receive monthly payments?
Payments will be received by eligible parties starting around July 15, 2021. You can check your eligibility using this tool created by the IRS. Currently, the IRS is using 2019 and 2020 tax filings to decide who may be eligible. If you are a non-filer and have registered for the Economic Impact Payments online previously, you should not need to register for the child tax credit advance payments at this time. If you have not previously registered, you may do so at the Non-filer Sign Up Tool here.
You can also find more about the temporary increase for the child tax credit and the upcoming advance payments here.
Be sure to speak with your tax professional to determine the best course of action moving forward with these advance tax credit payments. Our team of experts is available to assist you.
Receive Free financial tips & Tax Alerts!
A business owner’s plate is quite full, if not overflowing, from the day-to-day operations to the background necessities like marketing and financial activities. The reality is it’s difficult to do…
Many businesses in certain industries employ individuals who receive tips as part of their compensation. These businesses include restaurants, hotels, and salons. Tip Definition Tips are optional payments that customers…
An array of tax-related limits that affect businesses are indexed annually, and due to high inflation, many have increased more than usual for 2023. Here are some that may be…