FORT KNOX, Ky. – A recent revision by the IRS of the 2021 Child Tax Credit allows qualifying families the option of receiving a portion of their refunds as prepayments. However, some may still have questions regarding the new changes.

Payments have been going out to eligible families; however, many taxpayers may still have questions about the recently revised 2021 Child Tax Credit.
Payments have been going out to eligible families; however, many taxpayers may still have questions about the recently revised 2021 Child Tax Credit. (Photo Credit: Photo courtesy of the IRS) VIEW ORIGINAL

The child tax credit is a federal benefit that reduces income tax liability for people with children. It’s determined by the number of dependent children a taxpayer has combined with the taxpayer’s income level. According to the IRS, the 2021 refund system was designed as a way to reduce child poverty and help create a more reliable stream of income based on the COVID-19 stimulus bill passed in March.

Congress advised the IRS to send monthly prepayments for child credit based on tax return records from 2019 and 2020. Those eligible for the CTC will receive a credit estimated in six monthly installments.

Letters were sent a few months ago notifying those eligible of the upcoming prepayments, the first of which was distributed around July 15. The child tax credit was expanded and increased to $3,000 for children age 6-17 (averaging $250 a month) or $3600 for children age five and under (averaging $300 a month) for eligible taxpayers.

Payments will continue to arrive around the 15th of each month through December, totaling half the amount of the credit. The remaining amount will be applied when tax payers file their 2021 returns.

Eligibility requirements maintain the children must be legal dependents who are U.S. citizens, nationals, or a U.S. resident aliens as of Dec. 31, 2021. Additionally, the child must also have a Social Security Number.

Families are urged to pay close attention to their eligibility. If prepayments are unintentionally distributed to those who don’t qualify, the money will have to be paid back to the IRS.

Because a portion of this year’s CTC is being distributed in advance, tax payers who typically receive a refund may notice a significant change to the amount when they file their returns. Anyone wishing to opt out of having the CTC sent as a prepayment can do so by visiting the IRS portal and following the instructions. The portal tool also allows users to view eligibility, verify payments, or make change to bank and direct deposit information.

Monthly deadlines are in place to opt in or out of the prepayment program. Once unenrolled however, a tax payer will not have the option to reenroll to receive advanced payments until the end of September.

For parents who do not file taxes due to earning less income than required for a return, the IRS states they must register as a non-filer and use the IRS online tool to assist with the child tax credit.

As of August, Congress had not yet determined if the CTC revision will apply to the 2022 tax year. If not, the CTC will return to being $2,000 per child under the age of 18.

Help is available to Soldiers and Families who have additional questions regarding taxes and finances. The U.S. Army Financial Readiness department offers a variety of services, and has trained specialists available to provide financial education and planning needs to the Fort Knox community.

For more information or to schedule an appointment, please call 502-624-5989. A full list of frequently asked questions and additional links and information is available at the IRS website Advance Child Tax Credit homepage.