Everyone’s least favorite Spring-time task has an extension this year since 2020 taxes are not due until May 17, 2021. It is especially important to file taxes this year to take advantage of the periodic expanded child tax credit payments available to many families in the second half of 2021. The American Rescue Plan Act of 2021 modifies the child tax credit in several significant ways:
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Allowing 17-year-olds to qualify;
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Increasing the credit to:
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$3,600 per child up to age 6 (based on the age at the close of the calendar year);
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$3,000 per child age 6 to 17;
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Allowing half of the credit to be paid in advance by periodic equal installments beginning in July and ending in December (families can opt out of the advanced payment); the second half would come when filing tax returns in 2022 (for 2021 tax year);
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Removing the $2,500 earnings floor; and
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Making the credit fully refundable, meaning no matter what you owe in taxes, you will get a refund of either $3,000 (or $3,600, depending on a child’s age), or half that amount if you take the other half in the July-December periodic installments;
Payments will be made to the tax filer who claimed the child on a previous year’s tax return (most likely 2020 or, if not available, 2019). Child tax credits are available for children who have a social security number so long as their parent or guardians file taxes, using either a social security number or an ITIN. Since the payments will be based on 2020 tax filings, it is important to file 2020 taxes by the deadline of May 17, 2020, in order to receive the periodic child-tax credit payments this year. People can apply for an ITIN using Form W-7. If you don’t have an ITIN by the due date of your return (including extensions), you may not claim the child tax credit. However, if you apply for an ITIN on or before the due date of your return (including extensions) and the IRS issues you an ITIN as a result of the application, the IRS will consider your ITIN as issued on or before the due date of your return.