What is the Child Tax Credit?
The Child Tax Credit is an advancement of the 2021 child credit that would otherwise be claimed on the 2021 Federal Income Tax Return for the parent entitled to claim the child for that year.
Who receives the Child Tax Credit?
The parent who claimed the child on the 2020 Federal Income Tax Return should automatically receive the monthly Child Tax Credit to the account where stimulus funds have been received.
To be eligible to receive the Child Tax Credit:
- A single filer’s adjusted gross income must be less than $75,000
- The adjusted gross income for a married filing jointly return must be less than $150,000
- A head of household filer’s adjusted gross income must be less than $112,500
What about divorced parents, non-married parents, or parents currently divorcing?
The same rule applies—the parent who claimed the child on the 2020 Federal Income Tax Return should receive the monthly Child Tax Credit.
If you believe you may be receiving monthly Child Tax Credit payments that ought to be claimed by the other parent, you can go to this website to opt out of receiving the monthly Child Tax Credit payments: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
If you believe the other parent may be receiving the monthly Child Tax Credit payments that ought to be claimed by you because you have (a) the exclusive right to claim your child as a dependent in a Divorce Decree, or (b) are divorced/not married and have possession of your child for more than 50% of the year, then you can request that the other parent opt out of receiving the monthly Child Tax Credit payments by visiting the link immediately above. Then, you can apply to receive the monthly Child Tax Credit by visiting this link: https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool
If you are currently divorcing or engaged in a custody dispute, you may consider consulting with an experienced family law attorney to help you address the monthly Child Tax Credit issue. While this is new territory for us all, experienced divorce and custody lawyers are familiar with handling how children are claimed on separated parents’ tax returns. At a minimum, since receipt of the monthly Child Tax Credit effects 2021 Federal Income Tax Returns, you should be sure to address this issue in your pending divorce or custody suit.
How does this affect my Child Support?
The short answer—monthly Child Tax Credit payments do not automatically affect your child support obligations at all. However, you may feel that receipt of the monthly Child Tax Credit is relevant to your child support arrangements. If so, consult with an experienced family law attorney right away.
If you are paying child support and the other parent who is entitled to claim the child on his/her 2021 Federal Income Tax Return is receiving the monthly Child Tax Credit, then presumably no changes should be made because things are working as the Federal Government intended and the parent receiving the Child Tax Credit will handle the claim on his/her 2021 Federal Income Tax Return.
However, if you are receiving child support, have the right to claim the child as a dependent on your 2021 Federal Income Tax Return, but believe the other parent is receiving the monthly Child Tax Credit payments, you will want to address this issue right away because you will have issues with your 2021 Federal Income Tax filing. Consult with an experienced family law attorney to discuss your options.
How much are the Child Tax Credit monthly payments?
The monthly advancements are up to $300 per month, or up to $3,600 per year, for each child under the age of 6; and up to $250 per month, or up to $3,000 per year, for each child age 6-17.
Can you receive the Child Tax Credit if you did not file your 2019 or 2020 Return, or if you have not given the IRS information for receipt of stimulus funds?
Maybe. If you have not filed your 2019 or 2020 tax return, you must complete this sign-up tool to apply for benefits: https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool
When are the monthly payments received?
The monthly advance payments should be received by the 15th of each month.
Can you opt out of the monthly advance payments?
Yes, as discussed above, you can opt out of receiving the Child Tax Credit by visiting this website: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
Why would you want to opt out of the payments?
If planning to receive a refund when you file your Federal Income Tax Return is part of your saving plan, you may want to opt out of the Child Tax Credit because the amount of your refund will be reduced by the amount you receive in Child Tax Credit monthly payments.
If you are divorced and the other parent is entitled to claim the child as a dependent, to avoid a mess when the other parent goes to claim the child on his/her 2021 Federal Income Tax Return, you should opt out of the Child Tax Credit.
If you are in the process of divorce or a custody dispute and the issue of who will claim the child on his/her 2021 Federal Income Tax Return is not yet resolved, or if child support is being paid or received pursuant to a Temporary Order, you may want to opt out of receiving the Child Tax Credit until your divorce is resolved for the sake of clarity.
Consult with an experienced divorce and custody attorney right away if you have questions about how the Child Tax Credit is impacting you or your family, or if you feel changes should be made to your orders in light of this new legislation.
Sources: New York Times; IRS.gov
