American families will see the first monthly advance of the scaled up 2021 Child Tax Credit (CTC) payment on Thursday, with checks continuing on a monthly basis through the rest of the year.

The IRS launched two new portals in late June that can help you check your eligibility, change your bank account information and opt out of the monthly payments. Non-filers can also now use a separate tool to enroll in the monthly credit.

Experts say taking the time to analyze your situation and access these tools could help ensure you receive your entire first payment on time — and it could also help ensure you’re not hit with a big tax bill come 2022.

Here’s what you need to know about claiming your credit and collecting your first payment next month.

What you need to know to collect your payment

How much money will I receive and who qualifies?

The March COVID-19 relief bill ramped up the maximum credit households can claim to $3,600 per child ages 5 or younger and $3,000 per child between ages 6 and 17. Originally, the credit was only worth up to $2,000 per each dependent under the age of 17.

How much you’re eligible for depends on your adjusted gross income (AGI). To qualify for the first $2,000 of either payment, single parents would have to earn below $200,000 and married couples would have to make less than $400,000 combined. Qualifying for the top-up portion is stricter.

Eligibility for the Child Tax Credit
Filing status Income limits for $2,000 payment Income limits for extra $1,000 or $1,600
Single $200,000 $75,000
Head of household $200,000 $112,500
Married $400,000 $150,000

Source: IRS

The entire credit is phased out by $50 per every $1,000 over the income threshold.

One example: A married couple earning a combined $100,000 a year with two children under age 17 and one child under age 6 would be eligible for a $9,600 total tax credit, half of which ($4,800) would be split up in a monthly payment worth $800 for six months.

Another key change: The credit is fully refundable for 2021, instead of just 70 percent. That change helps low-income Americans claim the entire credit.

For each qualifying child under age 6, you will receive up to $1,800 in advance, split among six monthly payments of $300. You’ll receive $1,500 in advance, split among six payments of $250, per each dependent over age 6 and under age 18.

If you still have questions about whether you qualify for the scaled up payment, the IRS’ new Child Tax Credit Eligibility Assistant portal can help. All you’ll need is your 2020 tax information (or your 2019 records if you haven’t yet filed for last year), which should also have information about any dependents or child tax breaks you’ve previously claimed in addition to your household income records for the year.

How to collect your payments

Most families will start to receive monthly payments automatically come July 15 if the IRS has enough information on file and determined that they’re eligible, the agency said. That will be based on your most recently filed tax return.

“If they determine that you qualify for these monthly Child Tax Credit payments, they’re going to start making that payment in July if you don’t act or do anything,” says Mark Jaeger, vice president of tax operations at Tax Act.

You should have received two documents from the IRS by mail, the first being an outreach notice describing the CTC and the second statement showing how much you’re eligible for based on your latest income and dependent information. But it’s not an emergency if you haven’t, now that the IRS has created three separate household portals.

Households will most likely receive their monthly payments as a direct deposit, mailed physical check or prepaid debit card. As always, direct deposits are the fastest form of disbursement.

When will I receive the CTC?

According to the IRS, the monthly credit you receive, depending on your AGI and total number of dependents, will be distributed on:

  • July 15
  • August 13
  • September 15
  • October 15
  • November 15
  • December 15

What to know about accessing the IRS’ three new portals

The IRS’ new portals will be your closest ally if you’re a U.S. family banking on the scaled-up CTC for financial support, experts say. That’s especially true if:

  • Your situation changed from the last time you filed your taxes, whether it was 2020 or 2019;
  • The IRS’ initial notice by mail penciled you in for a payment lesser than what you qualify for;
  • You’re expecting a baby in 2021 or had a child since the last time you filed your taxes;
  • You want to opt out of the monthly payment and instead receive one lump-sum refund on your 2021 tax return;
  • You want to verify your eligibility; and
  • You want to check the status of your payment.

If any of these circumstances sound like you, you’ll want to access the IRS’ Child Tax Credit Update portal.

As of now, families can only use the tool to verify eligibility for the payments, opt out from the monthly advance and adjust their direct deposit information. But if you’re wanting to switch to a different bank account, you’ll want to act fast. Any updates made by Aug. 2 will apply to the Aug. 13 payment and all subsequent monthly payments for the rest of 2021.

Future versions, are slated to let families view their payment history and update their income, mailing and family information, with those updates planned for early August and then the late summer and fall, according to the IRS.

Even if there are mistakes and you don’t end up receiving the full monthly advance that you’re eligible for, you’ll be able to claim those missing funds next year during the 2022 tax filing season.

How to access the CTC update portal

The IRS wants to ensure that families accessing the update portal are legitimate, meaning they’ll have to verify their identity to prevent theft. You’ll have to create an IRS account and also set up what’s called an account, a third-party verification platform that will ask you for photo identification to prove that you’re who you say you are. If you already have an existing IRS username or an account with a verified identity, you’ll be able to easily and quickly use those accounts to sign in, according to the IRS.

And here’s where your IRS notices might be particularly important: Anyone who lacks internet access or otherwise cannot use the online tool may unenroll by contacting the IRS at the phone number included in your outreach letter.

What if I don’t file a tax return?

If your family doesn’t normally file a tax return with the IRS, the portal you’ll want to access first is already up and running on the agency’s website.

That portal will ask households to supply their most up-to-date bank account information, as well as key details about their income and qualifying children. The tool then automatically fills in a very basic 2020 federal income tax return that is electronically sent to the IRS, the agency says. After that, you’ll be good to go on claiming your scaled-up payment.

“If you’re a non-filer, obviously you don’t have a tax return for 2019 or 2020,” says Amy Lins, senior director of enterprise learning at Money Management International. “The IRS has to be able to find you, they have to be able to know enough about you, to give you the tax credit.”

Individuals who haven’t submitted their 2020 tax return, however, shouldn’t view this as a substitute to submitting their information.

“If you really do have a filing requirement for 2020, they want to make sure that you’re actually going through the tax return filing process because you’re signing the return and saying everything is accurate and your information is up to date,” Jaeger says.

Who should consider opting out of the monthly payment?

If you aren’t interested in receiving half of the credit you’re eligible for in the form of six monthly credits, you’re now able to go in and unenroll.

Households might want to unenroll purely out of preference. Perhaps you like collecting a sizable refund on your tax return or you utilize that lump-sum amount for other budgeting or saving purposes during the year, such as an emergency fund or a vacation.

From a more practical standpoint, you might want to consider opting out of the monthly payment if an income or dependent situation change for 2021 reduces how much in credits you’re eligible for. That could prevent you from having to pay a sizable chunk back at the end of the year.

Divorced families might also want to consider whether it’s worth opting out of the payment, particularly if an ex-spouse or family member will be claiming their eligible dependents in 2021.

Another overlooked group that might want to unenroll: Business owners or gig workers, who are supposed to make estimated tax payments. The risk is that the IRS might reduce the monthly CTC payment you receive to offset the cost of those estimated payments, Jaeger says.

But fearing a sizable tax bill at the end of the year might be hyperbole. Income thresholds for the first $2,000 portion of the credit are much higher, making it a valid safety net to prevent you from having to pay all of it back.

“I don’t think you’re going to have a huge problem in regards to big overpayments back,” Jaeger says. “If something happens to be slightly off based on what you earned, you at least have that part of the credit still on your tax return that can decrease to help cover that monthly payment.”

Bottom line

It’s especially important to file your tax return for 2020 as soon as possible, not only because of your possible tax credit payments, but you may have racked up penalties for missing the May 17 deadline. You want to ensure that the agency has your “latest and greatest information” to expedite delivery, Jaeger says.

Tax returns must be processed by June 28 to be reflected in the first batch of monthly payments scheduled for July 15, according to the IRS. And even if you receive your credit in subsequent monthly installments, the agency says it will adjust the monthly amounts upward to ensure that people still receive half of their total eligible benefit by the end of the year.

If you still have questions, don’t be afraid to utilize the IRS’ communications, including its regularly updated explainer on frequently asked questions. A tax professional might be able to offer you more specific advice.

Families should consider allocating the cash they receive toward priority expenses first, such as outstanding bills, rent, commuting costs, food or child care expenses. After that, you should think about using the money to build up an emergency fund or create a long-term savings fund for future goals, such as your child’s college education.

“The idea was to put money in the hands of families that need it,” Lins says. “If there are families still struggling with childcare or underemployment or medical bills, that money can help them in advance.”

A growing number of lawmakers on Capitol Hill are pushing to extend the scaled up CTC until 2026 — all the more incentive to get familiar and comfortable utilizing these tools.

“It’s something you’re going to interact with more based on your life-event changes,” Jaeger says. “It’s not ingrained in taxpayers’ minds to do that today, but if it’s something that continues to be offered, it’s almost like you have to get it ingrained in your mind that you will go out and interact with this portal to provide updates.”

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