IRS makes important changes to child tax credits

The Staunton, Augusta County & Waynesboro United Way Volunteer Income Tax Assistance Program wants to remind parents of children who will be under the age of 18 that there have been a number of changes to the child tax credit for tax year 2021.

The Advance Child Tax Credit may be helping many families in the Staunton, Augusta County and Waynesboro areas as early as this month. For most tax filers, these changes require no action by taxpayers to receive half the total credit in advance.

However, Dan Sullivan, lead volunteer with the Valley VITA program, cautions that these payments are unlike the stimulus payments, and they must be repaid if payments are received for children who will not be claimed on the 2021 tax return.

Taxpayers whose primary residence is in the United States (for more than half of 2021) and have filed a 2019 or 2020 tax return, or gave the IRS information to receive the Economic Impact Payments using the Non-filers Tool, claiming qualifying children that will be under the age of 18 at the end of 2021 should be automatically enrolled to receive the advance payments.

No further action is required. Taxpayers who have a requirement to file a tax return for 2020, and have not yet filed, should file as soon as possible to initiate the payments.

The Advance Child Tax Credit payments will be up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17, depending on the total household income. The enhanced payments are retroactive to the beginning of 2021, and the payments not made in advance will be claimed as a refundable credit on the taxpayers’ 2021 tax return.

If there were children on the taxpayers’ 2019 or 2020 returns who will be under 18 at the end of 2021, and who will not be claimed on the 2021 return, any advanced payments received for those children will be repaid on the 2021 return. To avoid owing the IRS those payments, taxpayers will be able to unenroll from advance payments. Also, any taxpayer who prefers to claim the enhanced child tax credit when they file the 2021 return next Spring may unenroll from advance payments. The deadline to unenroll from the July payments was June 28; the deadline for unenrolling from any future payments is Monday, Aug. 2.

If a taxpayer has no requirement to file a 2020 tax return and therefore did not file a tax return for 2020, the IRS is offering a Non-filer Sign-up Tool, also referred to as a “Simple Return”. This tool can also be used to claim the first and second Economic Impact Payments, as well as the 2020 Recovery Rebate Credit. There are payment delaying consequences if individuals fail to follow the IRS guidance for the tool. Do not use the tool either if you are a resident of a U.S. territory or you (or your spouse, if married) will not have a primary residence in the U.S. for more than six months in 2021.

If a child is born in the year 2021, the taxpayer may not file for the Advance Child Tax Credit. Children born during 2021 may only be claimed when filing the individual’s 2021 income tax return.

For further information regarding the Child Tax Credits, contact Sullivan at (540) 885-1229, ext. 5. Or dsullivan@enroll-virginia.com.