Enhanced child tax credit payments begin soon
The tax credits are part of the American Rescue Plan
NEW ORLEANS (WVUE) - Nearly 40 million families are set to receive monthly child tax credit payments beginning July 15, as part of President Joe Biden’s $1.9 trillion coronavirus relief package.
The expanded credit was signed into law in March, increasing the potential maximum payout in 2021 to $3,600 for children under the age of 6 and $3,000 for children between the ages of 6 and 17.
The IRS will determine eligibility based on 2019 and 2020 tax years, but people will soon be able to update their status online.
Eligible families who don’t normally file tax returns can click here to register for the monthly Advance Child Tax Credit payments.
As a mother of five, Sarah Perron says she can use the Advance Child Tax Credit payments that will begin on July 15.
“It’s definitely going to help because all I do is Uber and work from home right now, so it’ll definitely take some of the strain off, but I also feel like there’s going to be some people that aren’t going to want to go back to work because they get this little bit of money and that’s not necessarily good,” said Perron.
The upfront monthly payments are due to the COVID-19-related American Rescue Plan.
Richard Tullier is a veteran CPA with Wegmann Dazet & Company.
“This was passed back in March and what it does is, it says if you have a child under the age of 6, you’re eligible for a $3,600 credit, so it’s a $3,600 credit as opposed to the original $2,000. If your child is over the age of 6, or 6 or older rather, then up to the age of 17, through the age of 17 you’re allowed to get a credit of up to $3,000,” Tullier stated.
But only half of the tax credit is available in advance. “So, if they’re entitled to a $3,600 credit, they’ll get $1,800 now and $1,800 when they file their return,” said Tullier.
Some taxpayers do not want the tax credits in advance. June 28 was the deadline for opting out. Tullier says if you missed the deadline, you can still opt-out of future payments.
“There are several people who use that credit at the end of the year as an offset to their federal taxes,” he said.
He discussed the process for opting-opt.
“If it’s a married couple, both husband and wife need to opt-out and if you want to opt-out you have to set up an I.D. through the IRS; in order to do that you need a driver’s license and a cell phone capable of taking a picture of that driver’s license, so it’s not for the people who are not technologically savvy, I’ll say,” said Tullier.
Norbert and Nicole Nwoye were also in City Park, visiting from Texas. They are both professionals and doubt they will qualify for the tax credits.
“Even if we do qualify it’s probably going to be a diminished amount,” said Norbert Nwoye.
Still, he thinks the increased financial help is appropriate for lower-income parents.
“They never had a break in their life, so this is actually a good thing for them as long as it doesn’t last, it doesn’t stay forever; six months of child income break is not a bad thing,” he said.
His wife did not share his opinion. She thinks the tax credits should not end at the end of 2021.
“I kind of disagree with a little bit of what my husband said, I think it should be permanent and I think it should be a little bit for a higher-earner income like us because we deserve to catch a break, too,” said Nicole Nwoye.
Tullier said according to the IRS provisions high-wage earners will get less in the way of child tax credits.
“There are limitations if you make over a certain amount of money, for example, if you make over $150,000 you start what’s called a phase-out where you get a reduced amount of credit below that $3,000 or $3,600,” he said.
And individuals or couples who did not file tax returns in recent years will have to apply for the tax credits through the IRS website.
“Let’s say it’s a grandparent who takes care of their grandchild and claims their grandchild and all they have is Social Security or even, you know, regular parents who for some reason are on government assistance and aren’t required to file a tax return,” said Tullier.
“Then they can go to that “Non-Filing Tool.” If you filed a return in either ’19 or ’20 you’re automatically in the system,” said Tullier.
Go to the IRS website to opt-out or apply for the tax credits: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
The tax credits are not subject to taxation.
“No, it’s not taxable. What it will do, it’ll reduce the amount they’re going to get later,” said Tullier.
Who is eligible for Advance Child Tax Credit payments?
- Anyone with a qualifying child who is properly claimed as the taxpayer’s dependent.
- You – or your spouse, if married filing a joint return – must have your main home in the United States for more than half the year.
What do I need to do to receive the payments?
- Generally, nothing. If you are eligible to receive advance child tax credit payments based on your 2020 tax return or 2019 tax return, you should receive the payments automatically.
- If you did not file a 2020 or 2019 tax return, use the non-filer tool online.
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