ARPA – A portion of the American Rescue Plan Act (ARPA) made a couple of changes in the Child Tax Credit, effective for tax years beginning after December 31, 2020, and before January 1, 2022 (i.e., the “2021 calendar year” for calendar year individuals) – ONE YEAR ONLY. The age limit for the higher child tax credit for a “qualifying child” is raised from “under age 17” to “under age 18”. The credit amount is increased from $2,000 per qualifying child under the age of 18 to $3,000. If the qualifying child is under the age of 6 as of the close of the year, this credit is increased to $3,600. Again, keep in mind this is for one year only. The increase ($1,000/$1,600) is reduced when the taxpayer’s income exceeds $150,000 (MFJ/QW), $112,500 (HH), and $75,000 (all others).
ADVANCE PAYMENTS – In addition to creating a higher child tax credit for qualifying children, ARPA creates an Advance Payment of the higher child tax credit amounts. Starting in July 2021 and running through December 2021, the Treasury is to send payments out monthly payments in connection with this credit. These payments are exactly 1/12 of the full year’s credit ($250/$300). IRS has provided lots of information on these Advance payments on its web site irs.gov. On June 7, IRS announced in News Release 2021-124 it has started sending letters to more than 36 million families who appear to be eligible for these advance payments.
Now, on June 22, IRS announced in News Release 2021-130 the launching of two new online tools to help families manage and monitor the advance payments.
One tool, the Child Tax Credit Eligibility Assistant, allows families to answer a series of questions to quickly determine whether they qualify for the advance payments.
The second tool, a Child Tax Credit Update Portal, allows families to verify their eligibility. This is a secure portal that requires taxpayers to create an account and to have internet access and a smart phone or computer. On June 23, 2021, the portal could be found by going to irs.gov, clicking on “Get Answers on the Advanced Child Tax Credit”, and scrolling down the screen to the button. Of course, IRS continuously changes its web site.
To access the Child Tax Credit Update Portal, a person must first verify their identity. If a person has an existing IRS username or an ID.me account with a verified identity, they can use those accounts to easily sign in. People without an existing account will be asked to verify their identity with a form of photo identification using ID.me, a trusted third party for the IRS. Identity verification is an important safeguard and will protect your account from identity theft.
This portal also allows taxpayers to unenroll, or opt out from receiving the monthly payments. A taxpayer may want to opt out for various reasons such as:
1) Wanting to receive a lump-sum amount for the full amount when they file their tax return.
2) When the credit has been used in determining their estimated tax payments and receiving advance monies would create a shortfall in estimated tax payments.
3) Knowing the income for 2021 will be too high for the credit and not wanting to have to pay back any portion of the advance monies.
4) Knowing one or more of the “qualifying children” may be claimed by someone else in 2021.
This portal will eventually allow taxpayers to view their payment history, adjust bank account information or mailing addresses, update family status (i.e., qualifying children) and other features yet to be announced.
Anyone who lacks internet access or otherwise cannot use the online tool may unenroll by contacting the IRS at the phone number included in your outreach letter.