New Child Tax Credit Payments

There are some exciting changes coming to Indiana tax law this summer!

Learn all about it below, and find out…

• 1) If you qualify
• 2) Your next steps if you are eligible

Do you qualify?

The American Rescue Plan Act temporarily enhances the Child Tax Credit for tax year 2021. Half of the credit will be paid out in monthly payments from July through December of this year. The remaining credit will be claimed on taxpayer’s 2021 tax return.

The total amount of the credit is increased from $2,000 to $3,600 for children under age 6 and $3,000 for children ages 6-17. Eligibility for the credit is expanded to include 17-year-old children and taxpayers with no income.

The credit is now fully refundable, which means it pays out even if you do not owe taxes.

The new enhanced Child Tax Credit begins to phase out at $75,000 for single filers, $112,500 for head-of-household filers, and $150,000 for joint filers. Taxpayers who do not qualify for the new enhanced Child Tax Credit can still qualify for the regular Child Tax Credit amount ($2,000). The regular Child Tax Credit begins to phase out at $200,000 for single/head-of-household filers and $400,000 for joint filers.

The advance Child Tax Credit payments will not be subject to offsets for past due child support, nor federal/state debts. To determine eligibility, the IRS will first look to taxpayer’s 2020 return. If no 2020 return is on file, the IRS will look to taxpayer’s 2019 return.

What are your next steps?

Taxpayers should receive an IRS letter in the mail in June estimating their Child Tax Credit monthly payments.

Additionally, there are two IRS online portals.

• The first is the Child Tax Credit Non-Filer Tool and can be used for those who have not filed a 2019, nor 2020 tax return and do not have a requirement to file a return.
• A second tool is called the Child Tax Credit Update Portal (CTC UP). Initially, CTC UP can be used to opt out of the monthly advance payments for those who choose to wait and claim the full amount on their 2021 tax return. Later, taxpayers will be able to use CTC UP to update information such as mailing address, bank account, number of children, marital status and changes in income.

 

Still have questions?

If you need assistance with the advance Child Tax Credit, please contact Indiana Legal Services’ Low Income Taxpayer Clinic by phone at (812) 961-0011 or by email at taxclinic@ilsi.net.

DeeDee Gowan

Staff Attorney