There’s still time to claim the enhanced child tax credit as well as other federal tax breaks, which could be worth hundreds – if not thousands – of dollars. But you have to submit your 2021 tax return first.
This year, the filing deadline is Monday, April 18.
Most eligible families received half of the beefed-up credit in monthly installments last year.
But other folks, particularly some very low-income Americans who aren’t required to file taxes, have yet to see any of the funds.
Parents can claim the remaining amount on their 2021 return. They’ll need Letter 6419 that the Internal Revenue Service mailed earlier this year. It states how much families received in monthly child tax credit payments from July through December and notes the number of kids the agency used to calculate the credit.
More than 36 million families with more than 61 million children received monthly payments, which totaled more than $92 billion, according to the IRS.
However, because the monthly payments were based on a family’s income from a prior year, the amount of remaining credit they’ll receive may have to be adjusted if parents’ earnings or the family size changed in 2021. The letter is critical to this reconciliation.
Those who miss Monday’s filing deadline still have time to claim the child tax credit as well as other credits. They can request an automatic six-month extension. Also, taxpayers can receive the credits if they file a 2021 return within the next three years. Those who are not required to file returns or don’t owe money to the government generally will not face penalties.
Bigger child tax credit for 2021
Democrats beefed up the child tax credit to a maximum of $3,600 for each child up to age 6 and $3,000 for each one ages 6 through 17 as part of the American Rescue Plan Act, enacted in March 2021. Parents received up to $300 a month for younger children and $250 for older ones in the second half of last year – the first time the credit was delivered on a monthly basis.
The full enhanced credit is available for heads of households earning up to $112,500 a year and joint filers making up to $150,000, after which it begins to phase out. For many families, the credit then plateaus at $2,000 per child and starts to phase out for single parents earning more than $200,000 or for married couples with incomes above $400,000.
Prior to the expansion, which was in effect only for 2021, the standard child tax credit was up to $2,000 for each child up to age 17, and parents claimed it annually on their tax returns.
Filing a tax return also enables parents to claim the enhanced child and dependent care tax credit.
Eligible families can be reimbursed for up to half of the cost of care for 2021 – as much as $8,000 in expenses for one child under age 13 or other dependent and up to $16,000 for two or more dependents, under the American Rescue Plan Act expansion.
The credit is also fully refundable for 2021 for the first time, enabling more lower-income families to qualify. But taxpayers with adjusted gross incomes of more than $438,000 are not eligible.
The changes helped an estimated 7 million working families better afford child and dependent care, according to the Treasury Department.
Previously, taxpayers could claim between 20% and 35% of their eligible child care expenses, up to $3,000 in costs for one qualifying child or dependent or $6,000 for two or more of them.
Plus, certain Americans without dependent children can claim a larger earned income tax credit when they file their 2021 returns. The American Rescue Plan Act nearly tripled the maximum credit from $540 to $1,500 and extended eligibility to more people. The minimum age to claim the childless credit was reduced to 19, from 25, and the upper age limit was eliminated. It was the first increase in the credit for these workers since 1993.
The enhancement of all three credits was only in effect for 2021.
Reaching the lowest-income Americans
To achieve its goal of reducing the child poverty rate, the Biden administration has been focused on getting the child tax credit to the lowest-income families who don’t have to file returns. It’s not known exactly how many children are in these households – estimates range from 3 million to 5 million kids.
Next month, the administration will reopen a child tax credit portal, run by Code for America in partnership with the White House and Treasury Department, to give these parents a simplified way to claim the credit if they haven’t filed a return.
The IRS, state benefits agencies and community organizations nationwide have been trying to reach these families since the monthly payments began last summer, urging them to submit a recent tax return or use either the Code for America portal or a similar one created by the IRS.
This year, the focus has been on having these parents file 2021 returns so they can claim all the credits – and the third stimulus payment – for which they are eligible.
Reaching these families, however, has proved challenging. The administration does not yet know exactly how many non-filers have claimed the child tax credit, Gene Sperling, the White House official responsible for managing coronavirus relief efforts, told CNN.
Some 730,000 children were automatically signed up for the credit when their parents filed for the stimulus payments using a different portal, he said.
Also, more than 115,000 simplified returns were successfully processed last year using the Code for America portal, the non-profit group said in December. But most people were claiming the stimulus checks – only more than a fifth received the monthly child tax credit payments.
In addition to giving families information about the enhancement, administration officials and community groups are directing low-income parents to experts who can explain the credit, help families submit returns and ease their concerns about getting in trouble for not filing for years.
“What became clear is that awareness just wasn’t enough,” Sperling said of the early efforts last year. “The problem was people needed a trusted person that could answer their concerns and help them through the filing process.”