The American Rescue Plan provided for significantly increased Child Tax Credits. The credits for 2021 are up to $3,600 per qualifying child, as opposed to $2,000 before (and after). (In 2021, a qualifying child is typically a child under age 18 at the end of 2021 for whom the party claims the tax exemption.)
The American Rescue Plan also provided for the IRS to make monthly advance payments, starting in July.
The advance payments will be, each month, 1/12 of the amount the IRS calculates the party should receive for 2021. Typically, this amount will be $250 or $300 per child. Over the six months of July through December 2021, these payments will provide half of the party’s Child Tax Credit for the year.
The payments will be made as direct deposits, or by mail.
The other half of the Child Tax Credit will come in an income tax refund, the traditional way.
Now, what if your client is eligible, but the IRS does not have your client’s bank account information?
The IRS has just opened a portal, where eligible recipients can enter their information, so they can get the advance payments deposited directly. To learn more, and sign, up, your clients should go here:
Also, if a client wants to get the full credit when they file their 2021 return (in 2022) — and not get the advance payments — they can tell the IRS through the portal.
Finally, if the IRS is not aware that the party qualifies, they can sign up here as well. This could be the case if they did not have enough income to require a tax return in the past, if an agreement provides a change of dependency exemption for 2021, or if they have a newborn who was not entered on a previous tax return.