IRS unveils tool to opt out of monthly Child Tax Credit payments
Families can now opt out of monthly child tax returns (CTC) payments through an online tool on the Internal Revenue Service's website, just over three weeks before the agency sends out the first payments.
Americans can also check their eligibility using an additional tool that the IRS introduced on Tuesday.
"IRS staff continue to work hard to help people obtain this important loan," IRS Commissioner Chuck Rettig said in a statement Tuesday. "We will be working with partner groups across the country to share information and help eligible people get the prepayments."
Families can opt out of monthly payments through The Child Tax Credit Update Portal and instead receive full credit after filing their 2021 tax return. The IRS plans to update the portal later this year so that users can view their payment history and customize their banking information or mailing addresses. An IRS username, ID.me account or photo ID is required to use the tool.
The Child Tax Credit Eligibility Wizard can help families determine if they are eligible for prepayment by asking a series of questions.
The US $ 1.9 trillion bailout plan passed in March includes a one-year extension of the CTC that increases the loan amount and allows half of it in regular prepayments starting July 15.
The maximum balance in 2021 is $ 3,600 for children under 6 and $ 3,000 for children 6-17 years old. The six monthly prepayments are dispatched on July 15th, August 13th, September 15th, October 15th, October 15th and December 15th.
Here's what else you need to know about monthly payments.
Photo: Getty Creative
How much will my payment be?
Eligible households will receive half of their total payments in advance over the next six months, starting in July and ending in December. Monthly payments are $ 250 for older children and $ 300 for children under 6 years of age.
The amount will be determined in the 2020 tax return. If this return is not available, the IRS will use your 2019 return.
Read More: Here's What's Inside Joe Biden's $ 1.9 Trillion 'Rescue Plan' That Could Help Your Wallet
A submitter with children under 17 who earn up to $ 75,000 will receive full payment for each child, while those who earn up to $ 90,000 will receive a reduced amount. Joint applicants with children up to $ 150,000 receive full credit for their child, while those earning up to $ 170,000 receive a lesser amount.
Single filers earning more than $ 200,000 and joint applicants earning more than $ 400,000 are eligible for the legacy credit, which is $ 2,000 per child under the age of 17.
Who is Eligible?
The IRS will use your federal tax return and 2020 income to determine if you are eligible for credit. The prepayments are equal to half of the total credit of an eligible household, while the remaining half of the credit can be claimed on your 2021 tax return.
The payments would be made to eligible taxpayers who have had a primary residence in the United States for more than half a year.
House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer demonstrate the American Rescue Plan during the enrollment ceremony following the passage of the $ 1.9 trillion Coronavirus Disease Act (COVID-19 ) by US President Joe Biden on Capitol Hill in Washington. USA, March 10, 2021. REUTERS / Erin Scott
The CTC has also been made fully refundable, which allows taxpayers to receive the credit as a refund even if it is worth more than they owe in taxes.
Households with approximately 65 million children - or 88% of US children - will be eligible, the Treasury Department said in May. Payments are made by direct debit, check or debit card.
What do I have to do to get the loan?
Most taxpayers should not take any action other than filing their 2020 tax return to apply for the credit if they have not already done so.
Non-filing families can now use the Child Tax Credit Enrollment Tool for Non-Enrollments to provide information about themselves and their eligible children.
Read more: Taxes 2021: Credit, deductions and tax breaks for student loans and tuition fees
In addition, eligible taxpayers who do not wish to receive advance payments for 2021 can now opt out of receiving the monthly payments through "The Child Tax Credit Update Portal".
Can the loan become permanent?
As part of his American Families Plan, President Joe Biden suggests extending the CTC's expansion until 2025. He has previously said that the government is keen to make the performance permanent.
Some legislators also advocate permanent expansion of the CTC and the expanded Earned Income Tax Credit (EITC).
"We must not allow these critical extensions to expire after a year," wrote 40 Democratic senators in a letter in March. "This would lead to a significant spike in child poverty after we take historic steps to end it. It would mean millions of struggling adult workers being taxed into poverty again."
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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