Families will start receiving child tax credits next month and the IRS just launched its tool for non-filers eligible for the credit. But there seems to be a lot of questions still surrounding how this all works. So, we visited Turbo Tax to get an expert to help explain.
“People who should look forward to these advanced payments are those that meet the income eligibility requirements and also the dependent requirements for age,” said Lisa Greene-Lewis, a CPA at TurboTax.
She says “advanced” is a keyword to pay attention to. For tax filers, this is money you would normally receive on your tax return.
By taking it as a credit, it’s just breaking the payment up between now and your next refund. It’s also important to note that it’s not required to apply for this credit.
The IRS will automatically base it off of your latest tax return or the information you provide through the agency’s non-filer tool. That means if there are reasons you shouldn’t receive the credit, you must opt-out.
“So, your income is going to go up where it makes you not eligible in 2021 or your child's age is going to increase where you would not be eligible, then you should opt-out because one thing with the advanced payments, it is an advance and if your situation changes, you will have to pay it back,” said Greene-Lewis.
This same concept also applies if your situation changes in the opposite direction. So, if your income drops or you have a new baby, you could be eligible for more money.
And if you're divorced, the same rules apply to the child tax credit as filing your taxes.
“The parent that has custody, so that's the parent that the child lives with the longest usually, gets to claim them as a dependent, and then they're eligible for the child tax credit now. If the child is with the parent 50/50, then it usually goes to the parent whose income is higher, but then there's also situations where the parents can have an agreement,” said Greene-Lewis.
If you have more questions about child tax credits, Turbo Tax has a blog with updated information.