Your child tax credit money comes this week: Payment details, repayment penalty, what to know - PJ Digital Marketing | Agency / Company

The first payment comes July 15, with checks each month through the end of 2021. 

Stimulus checks might be in your rearview mirror, but for the majority of people with kids under 24, there’s more money coming. Changes to the annual child tax credit for this year mean that families will be eligible to receive up to $3,600 per child (calculate your total) between now and 2022, in a series of monthly payments (mostly). That’s where the simplicity ends.

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For example:

If you’re feeling overwhelmed by child tax credit facts and figures, this FAQ should help. We’ve also compiled some information on how parents might want to use the money and how to claim up to $16,000 more for your child care costs, much more than you could claim in previous years. This story is updated regularly.

When will the child tax credit be direct deposited and mailed out?

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The first thing to know is you won’t get your child tax credit payments all at once in 2021. Unless you tell the IRS you want to unenroll from the advance monthly payments, you’ll get six checks in 2021 and one in 2022. The second thing to know is that half of your total child tax credit payment will come this year through those monthly payments, with the other half coming in one lump sum as part of your tax refund in 2022. 

So in other words, your largest payment arrives next year. Until then, you get six smaller payments this year to start using right away. The idea is to bring you money sooner, which is why the checks will start coming in 2021 as “advance payments.”

Child tax credit payment schedule

Can you opt out of the child tax credit monthly payments? How?

You aren’t obligated to receive the advance monthly child tax credit payments this year. Instead, you can choose to get one payment in 2022, and the IRS Child Tax Credit Update Portal will allow you to do so. You may want to unenroll if you’d rather have one large payment for a projected expense in 2022, or if you’re concerned the IRS might overpay you this year and you don’t want to be saddled with an outstanding debt later. 

To stop advance checks, the IRS says you must unenroll three days before the first Thursday of the following month. See the chart below for deadlines. Once you unenroll in this year’s advance payments, you can’t yet re-enroll, though the IRS says it will make a re-enrollment option available later. Also note that for couples who are married and filing jointly, each parent must unenroll separately. 

Child tax credit payment unenrollment dates

Child tax credit portals: How they’re helpful

In June, the IRS opened more online tools and portals. The first portal is for people not normally required to file an income tax return, including low-income families. And the Child Tax Credit Eligibility Assistant tool — available in English and Spanish — helps families quickly determine whether they qualify. 

The latest Child Tax Credit Update Portal currently allows families to view their eligibility, manage their payments and unenroll from the advance monthly payments. It also now lets parents update their direct deposit information. In coming months, it will allow families to update other information if their circumstances have changed such as mailing address, marital status, income or dependents. For example, if a new child has arrived or will arrive in 2021 who isn’t reflected on a 2020 tax return.

Do you earn too much or too little to get the payments?

Income limits determine how much you will receive and if you even qualify, though there is no limit on the number of children you can receive credit for as long as you’re eligible. 

Single filers earning less than $75,000 per year, heads of household earning less than $112,500 per year and married couples earning less than $150,000 a year will be eligible for the full amount. 

The amount you’ll get will then phase out for higher incomes. Your child tax credit payments will phase out by $50 for every $1,000 of income over those threshold amounts, according to Joanna Powell, managing director and certified financial planner at CBIZ. In other words, your family could still receive some money above those income limits, but it won’t be for the maximum payment. 

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Child tax credit: Everything we know

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How to find out how much money you’ll get per kid

How the child tax credit payments will be divided between 2021 and 2022 might be confusing. For each qualifying child age 5 and younger, up to $1,800 (half the total) will come in six $300 monthly payments this year. For each kid between the ages of 6 and 17, up to $1,500 will come as $250 monthly payments six times this year. 

The IRS bases your child’s eligibility on their age on Dec. 31, 2021, so a 5-year-old child turning 6 in 2021 will qualify for a maximum of $250 per month. For both age groups, the rest of the payment will come with your 2021 tax refund when you claim the remainder of the credit in 2022. 

If you have a dependent who is 18 years old, they can qualify for $500 each. Dependents between the ages of 19 and 24 may qualify as well, but they must be enrolled in college full time. Here’s more on the financial details for qualified dependents. 

2021 child tax credit maximum payments

Does your newborn baby qualify you for a payment?

If you have a baby in 2021, your newborn will count toward the child tax credit payment of $3,600. Children who are adopted can also qualify if they’re US citizens. You’ll be able to update the IRS on a new dependent once that aspect of the Update Portal is available. 

What if you don’t receive a payment on the day it’s scheduled to arrive?

One thing to keep in mind is that the IRS is targeting the payment dates (see above). If you have direct deposit set up with the IRS, you might see a pending payment before the actual closing date. That means you might not be able to access the money right away, but that it’s in process.

It could take longer for your payment to arrive if you’re receiving the check by mail, or in the form of an EIP card. If enough time has passed and you’re concerned there may be a problem, you can use the IRS web portal to correct information. You’ll also want to make sure you let the IRS know if you moved (not just the US Postal Service).

What if the IRS sends you more money than you’re eligible for? 

Since the IRS uses your 2019 or 2020 tax return, your family may not qualify for the child tax credit payment when you file your 2021 tax return in 2022. In this case, you may have to repay the IRS some or all of the credit. The child tax credit rules aren’t as flexible as the stimulus check rules regarding overpayment. One example of when this would happen is if you and the other parent of your child (who is not your spouse) were both paid for the child tax credit for the same dependent.

To avoid this tax inconvenience, make sure all your information is updated before the payments start arriving. The new Update Portal will let you make adjustments in the coming months to verify your new income and marital status. 

What if you’re not normally required to file taxes? Will your family still get a payment?

Payments will be automatic for those who filed their 2020 tax returns by the May 17 deadline (or those who claimed all their dependents on a 2019 tax return). But what if that’s not you? Parents who didn’t file taxes should use the new IRS tool, called the “Non-filer Sign-up tool,” to get their money, even if you’re not usually required to file. This will let the IRS know your income level and how many dependents are in your household who count toward the child tax credit benefits. 

You could also file a tax return to get the full monthly child tax credit payment you’re owed. The IRS is offering information about free tax days in major cities to outreach to families who still need to file a 2020 return. 

The larger child tax credit can help families that have faced financial hardship due to the pandemic. 

If you have joint custody of a child, how will payments work?

For the first two stimulus checks, some parents who shared custody of a child but weren’t married to each other were entitled to each claim money for the same child. That was only if they alternated years for claiming the dependent — in other words, if one parent claimed the child on their taxes in odd years and the other claimed the child on their taxes in even years.

This is no longer allowed for the third check, and we’re told it won’t work that way for the child tax credit payments either. Here’s what we know so far about the child tax credit and shared custody situations.

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