Parents can see monthly payments or opt out using IRS portal

HOW TO SPEND CHILD TAX CREDIT

Families could use the extra cash to buy essential supplies such as groceries or medicine, according to CNET.

The tax credit could be used to pay for repair works on your car or dental treatment.

Experts have recommended that families should use the cash to pay off any outstanding debts.

Bruce McClary, of the National Foundation for Credit Counseling, told CNET: “If you’re in a situation where you have a lot of what I would refer to as the ‘toxic debt’ paying those balances off should be your No.1 priority.”

REPORT FAMILY CHANGES

One crucial caveat is that come 2022 tax season, if the family has undergone a significant change – new pregnancy, a wedding, new job, a kid turning 18 moving out of the house in 2021 – it could affect eligibility to receive the proper CTC credits.

If a family received more than they were supposed to, that money is likely going to have to be paid back to the IRS.

“​​This means that by accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase,” according to the IRS.

One solution to prevent having to pay back the CTC payments to the taxman is to opt out for 2021. 

Doing this will allow the family to assess the situation and file to receive a lump sum of up to $3,600 next year.

Essentially, a key way to offset having to pay back the feds for this money is to keep your family’s information updated.

CTC CRITERIA

The CTC aid is part of President Joe Biden’s $1.9trillion American Rescue Plan package passed through Congress on March 13.

To determine whether or not a family is eligible to take advantage of the CTC payments, the IRS is poring over the family’s most recent tax filing. 

The IRS also provides families with the Child Tax Credit Eligibility Assistant portal to help families learn about if and how much CTC support they might get.

And while tax returns are crucial to this process, many families are also collecting the aid without having filed a return at all. 

The IRS has sought to help these needy families who are qualified for CTC, but likely didn’t earn enough to have to file a return to use their nonfiler portal. 

WHAT IF YOU SIGNED UP LATE?

If you’ve signed up late, you’ll be pleased to know that you won’t miss out on the installments from previous months.

Instead, your remaining payments will be larger compared to those who signed up before they began in July.

For example, if you only missed the July payment but claimed afterwards, your monthly payments should now be up to $360 per child.

Or if you’ve missed out on August’s payment too, your credits will be split over four months instead, meaning you can get up to $450 per child.

If you have two children under the age of six, this means you can get a sweet $900 per month for the rest of this year.

THOSE WHO CLAIMED FROM THE START CONTINUED

Meanwhile, families can get a total of $1,200 for four children under age six.

If two children are aged one to five, and two children are over age six then that amount would become $1,100.

You can calculate how much you’ll get in child tax credits by using the free online calculator by Intuit Turbotax.

HOW MUCH WILL YOU RECEIVE IF YOU HAVE CLAIMED THE CREDITS FROM THE START

If you’ve always received the monthly child tax credits, you’ll be able to get $300 per child under six and $250 per child between six and 17.

Last year, American families had an average of 1.93 kids under 18, so it’s likely you may have one or two children.

In other words, if you have two children aged two and four, you will receive $600.

If your children are aged four and nine, then that amount would be reduced to $550.

Parents of one child aged five can claim $300, while one child age nine would warrant $250.

KEEPING FULL REFUNDABILITY

Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi are reportedly pushing to keep the full refundability.

“Nothing is locked in,” the aid said to Business Insider.

“The White House is pushing for it. We know Schumer is pushing for it. We definitely know Pelosi is pushing for it. But it’s a money game at this point.”

Senate Democrats plan to use the process of reconciliation to pass the spending bill, as it requires only a simple majority and can survive unanimous opposition from Republicans in the upper chamber.

POSSIBLE EXTENSION

President Biden extended the child tax credit from $2,000 to $3,600 earlier this year but it’s only a temporary measure.

He is said to be open to the idea of extending the program until 2025.

Senate Democrats are reportedly considering a three-year extension of the boosted credits.

An aide said to be familiar with ongoing discussions told Business Insider that the extension could be included in the $3.5trillion budget plan.

The lawmakers have already announced they plan to extend the credits as part of the plan, but the details have previously been scant.

The credits could be extended for three years but then would revert to $2,000 in a presidential election year.

COLLEGE STUDENTS ELIGIBLE

Families with 18-year-olds can claim a one-off $500 stimulus check.

Dependents between the ages of 19-24 are also eligible for a $500 check but they must be in full-time college education.

INCOME THRESHOLDS

Single taxpayers earning $75,000 or less are entitled to the full amount but the payments will phase out by $50 for every $1,000 over that threshold, according to CNET.

To qualify for the payments, couples need to make less than $150,000.

You can calculate how much you’ll get in child tax credits by using the free online calculator by Intuit Turbotax.

WHEN WERE THE FIRST TWO PAYMENTS?

The Biden administration expanded the Child Tax Credit for 2021 to $3,600 for kids up to age six, and $3,000 for children aged between six and 17.

The first child tax credit payment was sent on July 15 and the second was sent on August 13. 

HOW TO REGISTER FOR CTC

Parents who have not registered to receive the checks can still do so, and late registration can allow parents to claim installments from previous months.

After signing up for the tax credit, parents are able to track their payments and budget accordingly.

CTC BY AGE

Families with children under six years old will receive a cash sum of $300 per child, and households with dependents aged between six and 17 can claim $250 per child.

Families with children who will turn six years old before the end of 2021 qualify for the $250 check.

REGISTER NOW

Registering for the payment now is vital, especially to avoid late payments or problems with direct deposits, which some parents reported in August.

As the third payment is anticipated to be mailed out September 15, delays could also occur due to the postal system or if the IRS has an incorrect mailing address.

According to some estimates, four million children are missing out on new monthly payments as checks worth $13billion have gone unclaimed.

DEADLINE FOR NEXT PAYMENT

The deadline to sign up for the next payment is October 15.

On Twitter, the IRS urged parents to sign up for the benefits ASAP, sending several reminders that the time to update mailing addresses or bank information is now.

The agency sent several tweets this week urging families to sign up, reminding parents that the credit could be especially helpful for school expenses as students head back to classrooms.

CHILD TAX CREDIT STATS

The mid-month payments are set to continue being doled out through direct deposit or in paper form through December. 

About $15billion of the federal stimulus was “paid to families that include nearly 60 million eligible children” as part of the CTC made possible because of President Joe Biden’s $1.9trillion American Rescue Plan package passed through Congress in March.

The most recent checks helped reach an additional 1.6 million kids compared to the first month they were sent out.

ILLEGAL IMMIGRANTS TO RECEIVE CHILD TAX CREDIT

Undocumented immigrants have started receiving the $300 child tax credit payments for the first time.

Previously families with mixed-migration status were shut out of the program, but undocumented parents with children who are US citizens can now apply for this benefit.

While the child tax credit was expanded this year to include families with no income and undocumented parents with children who have Social Security numbers, the IRS said an “issue” caused families with parents who have an Individual Taxpayer Identification Number (ITIN) to not receive the first July payment.

Those families were supposed to get both the July and August payments last month.

Last week payments totaling $575million started being sent to as many as 1.2million mixed-status families, as reported by The 19th News.

AVOID PAYING BACK THE IRS

Parents have the ability to opt-out of CTC funds at any time – even if they accepted funds from the program’s first three payments.

Opting out can be helpful as it pushes the CTC to 2022 when eligible families can instead receive a lump sum instead of monthly payments in 2021. 

Factoring into this decision should be a close consideration of any changes in the family dynamic. 

If there is a change, the IRS can alter its level of support.

Whatever choice parents decide, mid-monthly payments for through the rest of 2021 or lump sums next year – they need to take action in the IRS’ Child Tax Credit Update Portal to keep their information accurate.

So if a family is receiving the full amount of CTC but isn’t qualified anymore, the IRS will be requiring repayment come next tax return deadline. 

FORM 2441

The IRS requires families to apply for the CTC by filling out Form 2441 and also prove income and complete information about the dependent care expenses.

Tax bills can be lowered by a lot because if the family qualifies for $8,000 CTC, they can reduce their tax obligations by $8,000 because its a dollar for dollar credit, according to iHeart. 

Normal write-offs for an $8,000 sum might only cut down the tax bill by $1,000.

WILL CHILD TAX CREDIT PAYMENTS BE EXTENDED UNTIL 2024?

The child tax credit monthly payments are set to expire in December, but parents may see these payments until 2024, as Democrats might extend them.

Democrats in the senate are reportedly considering including the three-year extension in their $3.5trillion budget plan, as President Joe Biden asked congress to do back in July.

However, if extended it is possible the aid will be scaled back both to decrease costs and to convince moderate Democrats to support the package.

Democrats have not ruled out getting rid of full refundability until the end of the decade to shave off $35billion from the budget.

Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi are reportedly pushing to keep the full refundability.

THIRD ROUND OF CHILD TAX CREDIT PAYMENTS ARRIVING WEDNESDAY

Families who chose to receive advance credits in 2021 will receive their third monthly installment on September 15.

Those who opted out can expect to receive a lump sum next year.

Parents will receive $300 per month for every child they have under the age of six.

Meanwhile, for households with children aged between six and 17, the amount is $250 per month.

Families could use the extra cash to buy essential supplies such as groceries or medicine, or follow one IRS recommendation and use the funds for school supplies.

IRS URGES PARENTS TO MEET OCTOBER SIGNUP DEADLINE

On Twitter, the IRS urged parents to sign up for the benefits ASAP, sending several reminders that the time to update mailing addresses or bank information is now.

The deadline to sign up for the next payment is October 15.

The agency sent several tweets this week urging families to sign up, reminding parents that the credit could be especially helpful for school expenses as students head back to classrooms.

The tax credits expire in December, and only four payments remain, with the September payment hitting bank accounts next week.

WHO IS ELIGIBLE FOR THE ‘SURPRISE STIMULUS’?

Daycare before school at a city site also counts but a teenager watching your younger kids for a little extra allowance money does not.

Trying to claim anything that you’re paying off the books also isn’t advisable since that income may not be claimed by the person you’re paying. 

The expenses won’t be claimed in taxes until next year, but record-keeping throughout 2021 to be prepared is your best bet. 

FLEXIBLE CREDIT

For instance, if parents regularly use a babysitter in 2021, they will be able to claim that as a child care expense for this tax year when tax filing time comes around next year.

CNET reported that it will probably be easier to claim child care credits for people and groups working in an official capacity, such as a summer camp program or licensed daycare provider, rather than a local teen.

But the credit is somewhat flexible.

CHILD AND DEPENDENT CARE CREDIT

The credit is aimed at allowing people to return to work while not facing hefty bills for care costs in their absence.

“The Child and Dependent Care Credit can get you up to 50% of up to $8,000 of child care and similar costs for a child under 13, a spouse or parent who cannot care for themselves, or another dependent so that you can work (and up to $16,000 of expenses for two or more dependents),” Nerdwallet explains.

This credit is another part of the American Rescue Plan, passed in March, and can start being claimed for this tax year in 2022.