Who couldn’t use more money right now for raising their family? Per the American Rescue Act signed in March 2021, monthly tax credit checks and direct deposits are being sent to qualifying families as of July 15, 2021.
- Payment timing – Monthly payments will continue through December 15, 2021, with the other half of a family’s expected credit check being issued in April 2022.
- Amounts – Families receive $300 for dependent children newborn to 5 years old; $250 for 6-17 years old.
- Eligibility – Children born or adopted in 2021 and prior years.
- Non-filers – If you filed in 2020, that IRS return will determine your family qualification. If your number of children changed during 2021, you should file to get the appropriate amount. If you never file, you can use the IRS Non-filer Sign-up tool.
- Joint Custody – Only one parent will receive the tax credit, even in cases of joint custody. Speak with your tax professional to determine how this works in your situation.
- Citizenship – The tax recipient (at least one parent or guardian) and the dependent must be US Citizens.
- Income requirements – Eligibility for child tax credits is capped at income levels of $150,000 for couples and $75,000 for single parents.
Child Tax Credit Payments Are Not Free Money
Many people allow overpaying their payroll withholding amounts so they can look forward to receiving a rebate. The problem is that by doing so, you’re giving the government an interest-free loan while not having your own money to spend or invest. Remember, child tax credit payments are advances on your expected rebate. Your rebate portion after filing will be lower than in previous years.
Take Control of Your Income and Payroll Tax Payments
We always suggest that you pay the correct withholding amount from your paycheck. Families who know the child tax credit is coming and want to avoid being overtaxed in the meantime can request specific adjustments to their payroll tax deductions upfront.
Remember, if you have already accounted for your proper deductions on your W-4 and your child tax credits, you may not want to receive these child tax credit payments now or risk an unexpected pay-back on your tax bill at the end of the year.
The IRS has a guide for people who want to adjust their current payments or have other questions. Always consult with your tax professional to figure the best amount to be taken now or to receive in your current payments. This could also raise your amount owed based on the age change of children during the year, which is only a problem with the prepaid credits.
It’s important to understand all the ramifications of overpaying or receiving early tax credits. Let Synergi Partners help you sort out what is best for your family’s current finances and future decisions.