Child Tax Credit, Would You Rather Get One Lump Sum or Monthly Payments?
Time for a game of "Would You Rather." Would you rather get your money a little at a time or would you rather wait and get a bigger bump at the end of the year. The game is being played by the I.R.S. and our country's leaders when it comes to the Child Tax Credit deduction on your income tax. Here's the breakdown of your options.
How The Plan Works
When you file your annual income tax, there's always the Child Tax Credit you receive for dependent children living in your home. As part of the American Recovery Plan (ARP), instead of getting the lump sum at the end of the year, the IRS wants to divvy it out. Half of your earned credit would be paid in equal monthly installments July through December. The remaining half would come when you filed income taxes at the end of the year. Currently, this is a one time option for the 2021 tax year only, but The President is proposing to extend the program in his American Families Plan.
How To Opt Out of Monthly Payments and Get One Lump Sum
The IRS will automatically enroll you in the plan using the information you provided in previous tax filings or when you applied for the Stimulus Checks. If you prefer getting the one time lump sum when you file taxes, you must opt out of this plan. You can opt out at this IRS.gov website. If you weren't required to file taxes and didn't apply for any of the stimulus money, there is a form to fill out to apply at the same site.
Will You Have to Pay Back any of the Money
Theoretically, you could have to return some of the Tax Credit, if your eligibility changes. Because payments are based on your previous income tax filing, increases in your yearly income could potentially make you ineligible for the Credit. Also if the number of dependent children living in your home has changed, your allowable credit allowance could be reduced. Read more about the danger of not opting out at this website.
How Much Money Will You Get?
The ARP made some significant changes in the amounts received:
- The Child Tax Credit increased from $2,000 to $3,000 per child over the age of six
- It jumped from $2,000 to $3,600 for children under the age of six.
- Eligible ages were raised 16 to 17 years old.
- Monthly payments for each child between 6 to 17 years old would be $250
- Monthly payments for each child under the age of 6. would be $300
Full Child Tax Credit
- Married couples with income under $150,000
- Families with a single parent (also called Head of Household) with income under $112,500
$2,000 of the Child Tax Credit
- Married couples with income under $400,000
- Families with a single parent (also called Head of Household) with income under $200,000
To qualify you and your spouse, if you filed a joint return must have:
- Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
- Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and
- A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
- A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
- Made less than certain income limits.
Read more on eligibility and how to opt out of the monthly payment plan are available at the IRS.gov