People have been collecting the child tax credit for years but, due to the coronavirus pandemic, this is the first time people can get them in advance.
The move is designed to help those who already receive the tax credit. But, you might want to do a quick once-over before getting your money upfront.
"People will be receiving advance payments starting July 15th," said Lisa Greene-Lewis, a CPA with TurboTax. "This is an advance, so you may have to pay some of it back if you're not eligible when you go to file your taxes."
There are several changes that have been made in recent years to the child tax credit. Greene-Lewis says this is the first time 17-year-olds qualify for the credit. The amount per child is also different. For children under 6 years old, you can receive up to $3,600 and for children between the ages of six and 17, you can receive $3,000.
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A single filer earning up to $75,000 will receive the full amount, as will a married couple filing jointly earning up to $150,000. Greene-Lewis says each thousand dollars over the threshold reduces the child tax credit you receive by $50.
The IRS has already sent out letters to many people informing them of the advance on the child tax credit. The first one explains they are eligible for the program, while the second one gives the estimated amount you will receive.
"It's fully refundable," said Greene-Lewis. "That means you don't need to owe taxes in order to get the full child tax credit."
The advance will come out of your 2022 tax information but for the advance, it is using older information on file.
"We need to use the information in 2019 or 2020 returns to determine eligibility," said Raphael Tulino, an IRS Spokesperson.
That's why some people who lost their jobs or had their income affected during 2020 might want to opt out of the advance payments.
"If you take the advance and your income situation changes or your situation for your child's age changes, you may have to pay it back," said Greene-Lewis. "You may want to opt out if you think your income is going to go above those thresholds."
The IRS also has several tools available online to help you decide if you should opt out of the program. The first tool allows families to see if they qualify for the advance tax credit. The second tool allows people to update their information as well as opt out of the program.
"If you opt out it means you're going to wait until you file a tax return next year, in 2022," said Tulino.
If you want to opt out of the program. Tulino says you should go to the IRS update portal and opt out throughout this year.
"Wait to put it on a tax return when you file next year," said Tulino. "The full amount."
Greene-Lewis says the IRS has also launched a non-filer portal so that people who didn't file taxes in 2019 or 2020, but qualify, can still receive the advance credit.
