Article By Lila Quintiliani and Amelia O’Rourke-Owens
Qualifying families will receive half of their credit divided into 6 monthly payments deposited from July to December 2021. Families will receive the rest of the tax credit when they file their 2021 income taxes next year.
To be eligible for the credit, you must claim dependent children 17 and under who are a U.S. citizen, national, or resident alien and have a Social Security number. The child must be related to you and live with you at least six months of the year.
The benefit amount is determined by three factors per child: 1) the age of the child (under 6 or 6-17), 2) your filing status (single or married filing jointly), and 3) your modified adjusted gross income. The maximum benefit is $3,600 per child under age 6 and $3,000 for those older than 6 and under 18 years old; adults who file single are eligible for the maximum credit if their modified adjust gross income in 2021 is $75,000 or less, or $150,000 or less for married filing jointly adults. Once taxpayers reach these income thresholds, the benefit is gradually reduced to $2,000 per child.
The early distributions were automatically set to roll out starting in July 2021. The IRS will take the estimated credit you are due based on your 2020 taxes – for example, $3000 for a 16-year-old – and divide it in half, which is $1500. Then they will further divide it into 6 payments, which would be $250 ($1500/6). In this example, a family could expect to receive $250 per month from July to December and then the rest of the credit, $1500, in 2022, when they file their tax return next year.
If you didn’t file a return in 2020, then the IRS will look at 2019. For those who are not required to file taxes, the IRS has provided a portal for non-filers to submit information.
There are, however, some taxpayers who may choose to opt-out of the advance payments on the IRS website and file for the full payment on their next tax return. If you receive higher payments than you are eligible for on your 2021 taxes, you will have to pay back the IRS any amounts that you are overpaid.
Reasons to opt out of the payments – do any of these situations apply to you?
- You usually owe money to the IRS
- Your tax situation has drastically changed this year because you got a job or a higher paying job
- You have children who are aging out of qualifying
- You share custody of your children and have not worked out who is claiming the credit
- You know you will be making a large payment in the spring and would rather get the entire credit at once
Reasons to take the advance payments: anything other than the above!
Review this decision tree that can also help you make a decision that is best for your family: Download Childtaxcredit-decision-tree.
ABOUT THE PERSONAL INVESTMENT ENTERPRISE (PIE) PROGRAM
The Personal Investment Enterprise (PIE) program is a local savings program provided through Community Action Programs of Boulder County and Mile High United Way. The program is designed for low-income families to enroll in financial literacy classes and save through a matched saving account at a rate of 4 to 1. The first step in applying to the program is to attend an orientation meeting with Diana Sanchez at Community Action Programs at Boulder County. Diana may be reached at 303-441-3998 or at [email protected]. For more information on the PIE program visit https://www.bouldercounty.org/families/community-action-programs/personal-investment-enterprise/ or https://unitedwaydenver.org/personal-investment-enterprise-pie-program/. To see if you qualify, take this survey: https://www.surveymonkey.com/r/PrelimPIE.
