IRS offers online tools for managing Child Tax Credit payments

The Internal Revenue Service introduced two online tools Tuesday to enable families to monitor and manage their monthly advance payments of the expanded Child Tax Credit.

The American Rescue Plan Act that Congress passed in March provides families with monthly payments of the tax credit of up to $300 per child. Last week, the IRS unveiled a Non-filer Sign-up Tool to help low-income families who don’t normally file tax returns to register for the payments (see story). The new tools that debuted Tuesday include an Advance Child Tax Credit Eligibility Assistant that enables families to answer a series of questions to see whether they qualify for the advance credit. The Child Tax Credit Update Portal lets families verify their eligibility for the payments and, if they so choose, they can unenroll, or opt out from receiving the monthly payments so they can receive a lump sum when they file their tax return next year. That also helps them avoid having to repay any excess payments they might receive. The password-protected portal is available to any eligible family with internet access through a smartphone or computer. Future versions of the portal are planned for the summer and fall to enable people to see their payment history, adjust their bank account information or mailing addresses and other features. A Spanish version is also in the works.

The expanded Child Tax Credit is part of the Biden administration’s goal of reducing childhood poverty in families, enabling families to receive up to $3,000 or $3,600 per child, depending on their age. Eligible families will receive advance payments of the tax credit, either by direct deposit or check. Each payment will be up to $300 per month for each child under the age of six and up to $250 per month for each child ages six through 17.

“IRS employees continue to work hard to help people receive this important credit,” IRS Commissioner Chuck Rettig said in a statement. “The Update Portal is a key piece among the three new tools now available on IRS.gov to help families understand, register for and monitor these payments. We will be working across the nation with partner groups to share information and help eligible people receive the advance payments.”

The American Rescue plan increased the maximum Child Tax Credit amount in 2021 to $3,600 per child for children under the age of six and to $3,000 per child for children ages six through 17. The advance Child Tax Credit payments, which will generally be made on the 15th of each month, offer greater financial certainty for families to plan their budgets and pay their bills and other expenses. The IRS plans to issue advance Child Tax Credit payments on July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15. The American Families Plan that the Biden administration introduced aims to extend the expanded credits through 2025.

In lieu of receiving the advance payments of the credit, some families may opt to wait until the end of the year and receive the entire credit as a refund when they file their 2021 return. In this first release of the tool, the Child Tax Credit Update Portal now enables these families to unenroll from receiving monthly payments. The unenroll feature can also be helpful to any family that no longer qualifies for the Child Tax Credit or believes they will not qualify when they file their 2021 return. This could happen if, for example, their income in 2021 is too high to qualify them for the tax credit, or someone else (such as an ex-spouse or another family member) qualifies to claim their child or children as dependents in 2021, or if their main home was outside of the U.S. for more than half of 2021. Some tax professionals are encouraging their clients to opt out of receiving the monthly payments because they could end up owing money to the IRS next tax season if their circumstances have changed (see story).

To access the portal, a user must first verify their identity. If they have an existing IRS username or an ID.me account with a verified identity, they can use those accounts to sign into the portal. Those without an existing account will be asked to verify their identity with a form of photo identification using ID.me, a third party provider for the IRS. Anybody who doesn’t have internet access or can’t use the online tool for some reason can still unenroll by contacting the IRS at the phone number included in the outreach letter the IRS has been sending to taxpayers (see story).

In general, the monthly payments will go out to eligible families who either filed either a 2019 or 2020 federal income tax return, used the Non-Filers tool on IRS.gov in 2020 to register for an Economic Impact Payment, or registered for the advance Child Tax Credit this year using the new Non-Filer Sign-Up Tool on IRS.gov.

An eligible family who took any of these steps won’t need to do anything else to receive their payments automatically.

In general, the IRS plans to calculate the advance payment based on someone’s 2020 income tax return, but if that return is unavailable, either because it hasn’t yet been filed or hasn’t been processed yet, the IRS will instead figure the payment based on information in the 2019 tax return.