Advanced Child Tax Credit Myths
Since the expanded Child Tax Credit is a new program, many questions remain, including potential confusion over how advanced payments will affect tax refunds. Taxpayers need to be able to separate facts from myths to avoid surprises next year.
But first…what is the Child Tax Credit?
In July of 2021, millions of households started receiving monthly advance payments of the Child Tax Credit (Child Tax Credit) expanded due to the March 2021 American Rescue Plan.
The Child Tax Credit has been in effect since 1997, but the temporary expansion under the American Rescue Plan makes this year’s version radically different. There are 2 big changes:
1) The per-child amount has increased.
Until this temporary expansion, families received a maximum child tax credit of $2,000 per child up to 16 in a lump sum at tax return time. However, families who owed little or no income tax could only receive up to $1,400 per child, leaving more than 26 million kids ineligible for the full credit because their families’ earnings were too low. The new version temporarily increases the amount to $3,600 per child under age 6 and up to $3,000 per child between 6 and 17 (only for the 2021 tax year), regardless of a family’s income.
2) Eligible households will receive half of the expanded amount in monthly installments.
Families won’t have to wait to file their taxes to get all of the money. Instead, half of the money for the Child Tax Credit will be paid out each month to put into the hands of families when they need it most. For example, if you have 2 children between the ages of 6 and 17, your Child Tax Credit would total $6,000. That means you would get $3,000 (half of the total) in a check each month through the end of the year, or $500 per month.
Now to the Top Myths . . .
You will have to pay this money back next year.
Most people (with a few exceptions) will NOT have to pay any money back. For example, families earning between $40,000 – $60,000 will not have to repay the benefit. It is the same credit you would typically receive, except that it’s paid monthly instead of once a year after filing your tax return.
There’s a slight chance that the IRS might pay too much if there are changes in their family situation, such as:
- If a child moves out of the house and no longer lives with the caregiver for the required minimum of six months
- Your income increases
- Your tax filing status changes
If I get public benefits, I don’t qualify for the advanced Child Tax Credit.
That’s false. Receiving the expanded Child Tax Credit will not impact your eligibility for programs such as Medicaid, the Supplemental Nutrition Assistance Program (SNAP), or Supplemental Security Income (SSI).
I haven’t filed my taxes in the last few years, so I can’t get the monthly payments.
Even if you don’t usually file, you can still qualify for the monthly Child Tax Credit payments. Couples making under $24,800 annually and heads-of-household making under $18,650 can come to CWF to claim the Child Tax Credit. For the non-filer form, you will need:
- The full names and Social Security numbers (or ITINs for qualifying parents) for all adults and children in the household
- An email address to create an account
- A mailing address
- Banking information if you want to use direct deposit to get your payments. If you don’t have banking information, the IRS will send a check to the address provided for your Child Tax Credit payment.
I don’t qualify for the advanced Child Tax Credit because my child is 17 years old.
Nope! A significant change included in the American Rescue Plan enables parents and guardians to receive the tax credit as long as their child doesn’t turn 18 before December 31, 2021.
I won’t receive the monthly payments because my ex and I usually take turns claiming our children as dependents.
It all depends on which one of you filed taxes last. If you filed taxes last, then you’ll receive the advanced monthly payments. But if your ex-partner filed last year, then they will receive the advanced monthly payments. A note about Child Tax Credit scams: Feel that someone has taken your Child Tax Credit? We can help you claim the money.
I don’t qualify for the advanced Child Tax Credit because I have student loan debt.
This myth is not entirely true. You can still receive advanced monthly Child Tax Credit payments without having them garnished. However, if you’re in default of a federal student loan, the other half of the Child Tax Credit that you’ll get as a lump sum refund may be seized to repay federal student loans.
CWF can make sure you have the facts and all the information you need to benefit from the Child Tax Credit!
Don’t miss out on getting the advanced Child Tax Credit because you don’t have the correct information! Taxes are confusing and complicated, especially when the information changes. But if you’re a working family or individual in Southeastern Pennsylvania or Southern New Jersey earning less than $60,000 per year, you can get free, professional help from an IRS-certified CWF tax professional.