If you have children, you may qualify for the first advance child tax credit payment in 2021. These payments were granted by the American Rescue Plan Act of 2021, and may save you an extra $3,000 to $3,600 annually per child under 18. Half the payments will come in a monthly stipend, while the rest will be paid in a lump sum when you file your 2021 taxes.
Who is eligible?
If you have dependent children 17 or under and who have Social Security numbers, you may be eligible for the tax credits based on your household income. So far, the IRS has estimated that about 90 percent of American households with children will be eligible for these tax credits.
You will qualify if your adjusted gross income (AGI) is below $75,000 for individual filers, $112,500 for heads of household and $150,000 for married filing jointly or widows and widowers. If you make more than that, your credit is adjusted $50 for every $1,000 you make above the threshold. If you make $95,000 or over as an individual or $170,000 or over filing jointly, you will not get this tax credit.
If you don’t normally file a tax return, the IRS has set up a tool so you can register for your monthly payments. Finally, if you make $200,000 individually or $400,000 jointly, you can still claim the $2,000 per child standard credit.
How will I be paid?
Should you qualify, the IRS will directly deposit your money into the last account they had on file for you. If you didn’t send them your direct deposit information, you’ll get a check in the mail, which could delay your payments.
Will I have to pay any of the money back?
Since this is a tax credit, you might find yourself in a position to have to pay the money back—for example, if you’re earning over the threshold this year, or if one of your children turns 18 partway through the year.
Can I opt out?
Yes—and in cases like the above, it might make sense to opt out ahead of time. You must use the IRS’s online portal to do so. If you file jointly, both spouses must opt out separately. Check the IRS website to see the schedule for opting out each month.
What to do if you have other questions
If you’re not sure about whether you can (or should) take the advance child tax credit payments, the best thing to do is talk to a tax preparation service in Hayward, CA. Your accountant or tax preparer can help you determine which tax credits and deductions you should take, how they’ll affect your taxes and how it will affect your monthly income.
When you need tax advice from experienced accountants in the Castro Valley and San Leandro areas, reach out to Menjivar & Company CPAs, Inc. today. We are skilled at ensuring you get the maximum refund available. Let us help you save money on your taxes!
Categorised in: Tax Tips