First Monthly Child Tax Credit Payment Hits Bank Accounts Next Week
SALT LAKE CITY, Utah – In one week, many Utah families will find a deposit in their checking accounts as the Internal Revenue Service issues the first monthly payment of the boosted Child Tax Credit.
For 2021, Congress increased the Child Tax Credit (CTC) from $2,000 per child to $3,600 for children under age six and $3,000 for children ages 6 through 17. Eligibility is determined by the child’s age on the last day of the year.
Half of the total credit will be paid in advance to eligible families through monthly payments. The remaining half of the credit will be claimed when they file their 2021 tax return.
“The first monthly payments of the expanded and newly-advanceable CTC from the American Rescue Plan will be made starting July 15,” the IRS said in a news release. “Most families will begin receiving monthly payments without any additional action. Eligible families will receive a payment of up to $300 per month for each child under age 6, and up to $250 per month for each child ages 6 to 17.”
Utah families can check to see if they are eligible for the Advance Child Tax Credit payments using a new online tool.
“To make sure families have easy access to their money, the IRS will issue these payments by direct deposit, as long as correct banking information has previously been provided to the IRS,” the news release went on to say. “Otherwise, people should watch their mail around July 15 for their mailed payment. The dates for the Advance Child Tax Credit payments are July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15, and Dec. 15.”
Ahead of the first payment, the IRS and tax experts caution that some families may want to withdraw from receiving the monthly installments and instead wait until tax time next year to claim the credit.
“If your income level is increasing substantially from where it was in 2020 or 2019—depending upon which return the IRS has—I would be on the safe side and opt-out and wait to receive that credit until you file your return in 2022,” said Susan Speirs, the CEO of the Utah Association of Certified Public Accountants.
The IRS has also created an online portal to opt-out of the payments.
Speirs also cautioned that changes to family and dependent situations could impact eligibility for the tax credit.
“If you are in a situation where you’re divorced and children go back and forth between the parents, then you may end up having to owe some money back if the IRS doesn’t have that information.”
The online unenrollment tool only applies to individuals, meaning that married couples who file a joint tax return must both opt out of the payments if they wish to do so.
“You may want to unenroll from receiving advance Child Tax Credit payments for several reasons, including if you expect the amount of tax you owe to be greater than your expected refund when you file your 2021 tax return,” according to the IRS’ website.
Later this summer the IRS expects to offer additional online tools so that people can notify the IRS of a new baby and changes to marital status or income.
“Because these credits are paid in advance, every dollar you receive will reduce the amount of Child Tax Credit you will claim on your 2021 tax return,” the IRS website said. “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.”
The IRS is also encouraging those who don’t normally file a tax return to register for the Advance Child Tax Credit payments through the Non-filer Sign-up Tool.
“Some people desperately need that money,” Speirs said. “They’re still trying to recover from the pandemic. They’re still trying to get back on their feet and this is one of the reasons this credit was designed this way is to help Americans get back on their feet.”
“I would stress that this only through the end of 2021,” Speirs said about the advance monthly payments. “So don’t plan on this in 2022 moving forward. Don’t’ make this a part of your household budget.”