Advance Child Tax Credit Payments to Begin on July 15

As a response to the ongoing COVID-19 pandemic and economic impact, Congress passed H.R. 1319, the American Rescue Plan Act (ARPA) of 2021, which President Biden signed into law on March 11, 2021. The $1.9 trillion COVID-19 stimulus bill expands the Child Tax Credit (CTC) for tax year 2021.

Part of the relief provides advance payments of the 2021 CTC in the form of regular payments from July through December. These direct cash payments are intended to provide a boost to the current struggling economy by giving money to families in the most need of additional support.

The ARPA increased the maximum CTC in 2021 to $3,600 per child for children under the age of 6 and to $3,000 per child for children between the ages of 6 and 17. The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they do not have earned income or do not owe any income taxes.

Credit unions may experience additional deposit balances due to this program, similar to what has been experienced with the three rounds of recovery rebate payments.

Who is eligible for the advance CTC payments, and how much will they receive?

Advance payments of the 2021 CTC will be made regularly to eligible taxpayers who have a main home in the United States for more than half the year. The total advance payments will be up to 50 percent of the CTC. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or 2019 returns if the 2020 returns have not been filed and processed). Eligible families receive monthly payments of up to $300 for each child under the age of 6 and up to $250 per month for each child between the ages of 6 and 17.

The amount of the payments will be phased out if the taxpayer has adjusted gross income over $75,000 for individuals and, over $112,500 for heads of household, or over $150,000 for married couples filing joint returns.

How and when will people receive the advance CTC payments?

The advance CTC payments will be sent through direct deposit, paper check, or debit cards. The IRS and Treasury are committed to maximizing the use of direct deposit. Payments will be made on the 15^th of each month unless the 15^th falls on a weekend or holiday, then it will be received on the weekday prior to the weekend or holiday.

What will people need to do to receive the advance CTC payments?

The IRS will be using 2020 taxpayer information that is already on file to issue the payments. Most eligible taxpayers will not need to take any action now other than file their 2020 tax return if they have not already done so.

Will the IRS notify people after the CTC payments have been sent?

The IRS will provide notice to the taxpayers not later than January 31, 2022, which will include the taxpayer’s taxpayer ID, and the aggregate amount of the payments that were sent in 2021.

Are advance CTC payments taxable?

The advance CTC payments will not be counted as taxable income for the recipients since the rebates are a credit against tax liability and is refundable for taxpayers with no liability to offset.

Are the CTC payments subject to garnishments?

The ARPA did not include any specific protections for the advance CTC payments from any attachment or garnishment.

Can the member update their information or refuse to accept the advance CTC payments?

Eligible taxpayers who do not want to receive advance payment of the 2021 advance CTC will have the opportunity to decline the advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon.

Where can I view the American Rescue Plan for myself?

You can view the American Rescue Plan of 2021 online at the Congress.gov website.