1) The Child Tax Credit will now be issued in monthly installments.
The Child Tax Credit is one of the largest refundable tax credits, offering parents with children and disabled adults under the age of 17 up to $3,600 depending on their income level and the age of their children. Previously the Child Tax Credit was available only on the tax return. Now qualifying parents will receive the credit in monthly installments of $250 or $300. Individuals may also choose to opt out of monthly payments if they would like to receive the full amount of the credit at tax time.
2) Individuals must have a “Qualifying Child,” dependent in order to receive the Child Tax Credit.
Qualifying children must be age 17 or under at the end of 2021. Dependents who turn 18 in 2021 do not qualify for the tax credit. Other requirements include:
- Child must be a U.S. citizen, U.S. resident alien, or a resident of Canada or Mexico. The child must have a social security number that is valid for employment.
- Must be directly related to the taxpayer (son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, step brother, step sister, or a descendant of any of the above such as a grandchild, niece, or nephew.)
- The child must not provide over half of their own financial support.
- The child must have lived with the taxpayer for more than half the year. *Some exceptions apply in the case of newborns and divorced or separated parents.
3) Most families who file tax returns do not need to do anything to receive the credit.
The IRS will issue the tax credit automatically to individuals with eligible children based on their 2019 or 2020 tax returns. Individuals with qualifying children who have not filed these returns should file as soon as possible in order to update their information with the IRS.
4) Non-filers with qualifying children should use the IRS’ non-filers portal to update their information.
Individuals with qualifying children who are not required to file a tax return should use the IRS’ non-filer sign-up tool to update their information.
Developed in partnership with Intuit and delivered through the Free File Alliance, this tool provides a free and easy way for eligible people who don’t make enough income to have an income tax return-filing obligation to provide the IRS the basic information needed—name, address, and Social Security numbers—to figure and issue their Advance Child Tax Credit payments
5) Individuals may update their information using a soon-to-be-released Child Tax Credit Update Portal.
The IRS will issue monthly payments of the Child Tax Credit automatically to qualifying individuals.
Initially, individuals may choose to receive the full amount of the credit as a lump sum on their 2021 tax return. This may be a better option for individuals who prefer receiving a larger refund at tax time, and those who do not have withholding withheld from their paycheck. Later in the year, taxpayers will be able to update other information, such as mailing address, bank account info, number of qualifying children, marital status, and/or income. This will be an important step to take for individuals whose situation has changed since they filed their 2019 or 2020 tax return.
6) The IRS estimates there are over 26,000 children in Kentucky eligible but not signed up to receive the Child Tax Credit.
IRS Child Tax Credit data indicates 26,335 children may be eligible for the credit in Kentucky but are not currently scheduled to receive it. The total amount of unclaimed credit could be as high $79 million dollars. Individuals who support a qualifying child but have not updated their information with the IRS should do so as soon as possible by filing a tax return or by using the non-filers tool.