Since posting our overview of the changes in the Child Tax Credit, the IRS has released additional guidance. This information supplements our previous post.
To review, if you qualify for the Child Tax Credit on your 2021 return and your income is below the limits previously discussed, you will get a credit of $3600 for each qualifying child age 5 or younger and $3000 for each qualifying child age 6 – 17.
Starting on July 15, the taxpayers whose 2020 return indicated they are eligible for these credits will receive advance payments. From the IRS website:
“Your total advance Child Tax Credit payment amounts will equal half of the amount of your estimated 2021 Child Tax Credit. This amount is then divided into monthly advance payments to you.
As a result:
· For each of your qualifying children age 5 or younger, generally you will receive $300. That is determined by dividing $3,600 in half, which is $1,800. Six monthly payments of $300 will provide you with $1,800.
· For each of your qualifying children ages 6 to 17, generally you will receive $250. That is determined by dividing $3,000 in half, which is $1,500. Six monthly payments of $250 will provide you with $1,500.”
Most taxpayers will receive the advance payment via direct deposit. This is what the IRS says:
· Your 2020 tax return.
· Your 2019 tax return, including information you entered into the Non-Filer tool on IRS.gov in 2020.
· A federal agency that provides you benefits, such as: Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board.
If we do not have bank account information to issue you a direct deposit, we will send your advance Child Tax Credit payments by mail. We will issue Advance Child Tax Credit payments on July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.”
We previously discussed why some taxpayers may choose not to receive these advance payments, opting instead to receive the full Child Tax Credit when they file their 2021 return. The IRS now has a portal on its website to assist taxpayers who wish to unenroll from the advance payments.
For married couples filing a joint return, both the taxpayer and spouse must unenroll; if only one person goes through the unenrollment process, the other one will receive advance payments equaling half of the amounts discussed above.
You can unenroll from future payments by completing the portal process “three days before the first Thursday of the next month.” (It’s the IRS, you didn’t expect it be easy, right?) Here's how the opt-out dates fall:
For the July 15 payment, opt out by 6/28
For the August 13 payment opt out by 8/2
For the September 15 payment, opt out by 8/30
For the October 15 payment, opt out by 10/4
For the November 15 payment, opt out by 11/1
For the December 15 payment, opt out by 11/29
If you've missed the deadline to opt out of the first payment, using the portal now will prevent you from receiving the remaining payments.
The unenrollment process starts with establishing your identity, and some are finding this step to be cumbersome. If you don’t already have an IRS account, you will choose the ID.me option and follow these steps (information provided by ID.me and the IRS):
STEP 2 Confirm your email address Check your inbox for an email from ID.me. Click the button in the email to confirm your email address. Then, return to your browser. The page will automatically move forward to the next step.
STEP 3 Choose an MFA option You can receive a passcode via text message or phone call. You can also choose one of the other listed methods which use a phone app or physical key fob to securely send the passcode.
STEP 4 Choose a document type to submit Driver’s license, state ID, passport or passport card.
STEP 5 Submit document Either upload existing photos from your desktop OR type in the phone number of a cell phone that can take pictures. If you choose to take photos with your phone, ID.me will text you a secure link that will open your phone camera.
STEP 6 Take photos of your ID Follow the instructions displayed. For a driver’s license, state ID or passport card, remember to take a photo of the front and back. When you’re satisfied with the photos, click "Continue".
STEP 7 Take a video selfie Follow the instructions displayed to take a video selfie. You will be asked to look at the colors on your smartphone screen while ID.me takes a short video selfie to verify that you’re really you. For IRS, ID.me requires “Liveness” or Presentation Attack Detection (PAD) as an additional control. Liveness provides an additional layer of security within the identity proofing process, confirming the user is alive and present during verification.
STEP 8 Enter your Social Security number This is the final step and critical to uniquely resolve an identity to the claimed identity. ID.me protects all sensitive data with stronger encryption than many financial institutions.
STEP 9 Check for accuracy Make sure that all your information is accurate and complete. If it is, check the box attesting that the information is accurate, and then click "Continue". If it is not accurate, use the edit buttons to make changes.
STEP 10 Provide consent ID.me requires explicit consent prior to sharing any information. By clicking “Allow and continue,” ID.me will be able to send information to the IRS and you will be granted access to your account and the CTCUP.
As we so often say, every taxpayer’s situation is different, so we can’t offer a blanket statement that you should or should not opt out of the advance payments. But as we also like to say, our clients are never alone to navigate the complexities of the tax code. We’re here to help … give us a call!