How to make sure you don't owe the IRS for the Child Tax Credit

The enhanced child tax credit was included in the American Rescue Plan passed earlier this year. It expands the Child tax credit (CTC) from $2000 to up to $3600. Under the American Rescue Plan, the CTC was expanded to $3,600 for each child under age 6 and $3,000 for each child between ages 6 to 17. Previously, the credit had excluded children who had turned 17 and was limited to $2,000 per child.


Who Qualifies:

To qualify your child must be 17 or younger as of December 31, 2021, and you will only be entitled to the expanded credit if your family income fall below certain income thresholds:

  • $75,000 or less for single taxpayers

  • $112,500 or less for heads of households

  • $150,000 or less for married couples filing a joint return and qualified widows and widowers

What if I make more?

Families will receive $50 less for every $1,000 over an income threshold, until the enhanced payments are phased out for people who earn roughly $20,000 more than those salary thresholds.


In other words, single filers who earn up to $95,000 and married couples with combined incomes up to $170,000 would receive smaller payments, but above that they would be phased out entirely from the enhanced Child Tax Credit.


Families that earn above those phase-out caps may still qualify for the regular Child Tax Credit. The regular CTC of $2,000, taken annually on your tax return, is available to single parents who earn up to $200,000 and married couples who earn up to $400,000. Higher-income families who earn above those income thresholds don't qualify for either the regular CTC or enhanced CTC


Here's how not to owe:

Because the IRS is relying on tax returns to determine payments, it sometimes doesn't have the most up-to-date information about taxpayers, such as their latest income or number of children.


That could result in some taxpayers either receiving the cash payments when they aren't actually eligible, or some people receiving less than they are entitled to — such as if they had a child in 2021, which the IRS wouldn't be aware of since it's looking at either 2020 or 2019 tax returns for eligibility.


Some people may want to opt out of the payments in order to get a bigger tax credit when they file their taxes by April 2022, while divorced parents of children may want to opt out if their ex-spouses will claim their children on their tax returns for 2021.


Taxpayers will be required to repay any overpayments received if they are not eligible or their income results in a phase out of the credit. For example, your 2020 income during the pandemic qualified you for the enhanced CTC, but your 2021 income was higher and would disqualify you. In that case, you could be looking at a future bill from the IRS. If you owed money in 2020, chances are you should be opting out of the enhanced child tax credit.


How can I opt out of the payments?

The IRS said taxpayers will be able to opt out via an online tool called the Child Tax Credit Update Portal, the tool allows people to un-enroll from the tax credit before the first payment is made on July 15.


You must opt out by June 28 in order to skip the first payment on July 15. If you miss that deadline, you can unenroll for subsequent months, the dates to unenroll are:

  • By August 2 for the August payment

  • August 30 for the September payment

  • October 4 for the October payment

  • November 1 for the November payment

  • November 29 for the December payment

Can the Child Tax Credit payments be garnished?

Yes, according to the IRS.


The payments can be garnished by a number of creditors, including state and local governments and private creditors.



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