Yesterday the IRS launched a new portal to help you manage advance payments on the recently expanded Child Tax Credit, worth up to $3,600 per child. The tax credit is complicated—as it’s based on your estimated income for 2021—so you’ll want to use the portal to update your income and child dependent status (or opt out if you’d rather receive a lump sum credit when you file your taxes). Here’s what you need to know.
How much is the child tax credit worth?
As part of the American Rescue Act, the child tax credit increased from a maximum of $2,000 to $3,600 per child (although it varies, based on your income), with half of that amount to be sent out as advanced payments on the 15th of every month until the end of the year, either as a check or direct deposit.
Those advanced payments work out to a maximum of $300 per month for each qualifying child ages five and younger, and $250 per month for children ages six to 17. This Lifehacker post has more details on how the income thresholds work.
What does the Child Tax Credit Update Portal do?
For now, the Child Tax Credit Update portal will verify your eligibility for the payments and allow you (if you so choose) to opt out from receiving the monthly payments. However, per CNET, the portal will also be updated later this summer so that you can update your bank account information and mailing address, and most importantly, update your income or child custody status.
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Why is that important? Well, since the advance payments are based on estimates using your 2019 or 2020 income, your actual income for 2021 might be different than what the IRS thinks it will be. For example, you might receive a raise this year that disqualifies you from the credit, which would force you to pay back the advance payments later when you file your 2021 tax return. On the flip side, you might have had a child in 2021, which could entitle you to receive more money as part of your advanced payments. By keeping your income and child dependent status up-to-date, you can claim the money you are owed—with no surprises.
The opt-out option can be a good idea if you already know your 2021 income disqualifies you from advance payments, or if another parent is already claiming your children as dependents.
Two other Child Tax Credit tools to be aware of
Yesterday, the IRS also launched a Child Tax Credit Eligibility Assistant, a questionnaire-style tool that helps you determine whether you qualify for the advance child tax credit payments.
Also, since the IRS uses the income listed in your previous tax returns to determine whether you qualify for the Child Tax Credit, a Non-Filers Sign-Up tool was created for low-income earners who don’t normally file an income tax return (it’s not required if you make less than $12,000). For more on how this tool works, check out this Lifehacker post.
