CHILD TAX CREDIT
The American Rescue Plan’s expansion of the Child Tax Credit supplements the earnings of families receiving the tax credit. Specifically, the Child Tax Credit has been revised in the following ways:
- The credit amount has been increased. The American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for children under age 6, and $3,000 for other children under age 18.
- The credit’s scope has been expanded. Children 17 years old and younger, as opposed to 16 years old and younger, will now be covered by the Child Tax Credit.
- Credit amounts will be made through advance payments during 2021. Individuals eligible for a 2021 Child Tax Credit will receive advance payments of the individual’s credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1, to December 31, 2021. This change will allow struggling families to receive financial assistance now, rather than waiting until the 2022 tax filing season to receive the Child Tax Credit benefit.
- The credit is now fully refundable. By making the Child Tax Credit fully refundable, low-income households will be entitled to receive the full credit benefit, as significantly expanded and increased by the American Rescue Plan.
- The credit is now extended to Puerto Rico and the U.S. Territories. For the first time, low-income families residing in Puerto Rico and the U.S. Territories will receive this vital financial assistance to better support their children’s development and health, and educational attainment.
To facilitate the disbursement of Child Tax Credit advance payments during 2021, the American Rescue Plan requires the IRS to establish an online portal for taxpayers to update relevant data for mid-year payment adjustments (for example, the birth of a child during 2021). Here is the IRS link: https://www.irs.gov/newsroom/irs-families-receiving-monthly-child-tax-credit-payments-can-now-update-their-direct-deposit-information
Our entire Team at MillerMusmar CPAs is here to help you navigate through these programs. Please contact us if you require our assistance.
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