The IRS and U.S. Treasury have unveiled an online Sign-up tool designed to help families who do not normally file tax returns to register for monthly child tax credit (CTC) payments. The tool which would be accessible from July 15, has been created to provide a simple way for these taxpayers to provide the IRS with information required to process advance CTC payments. Taxpayers can provide information on qualifying children ages 17 and under, other dependents and direct deposit bank information for payments sent to their checking or savings account directly.
The IRS noted that advance CTC payments are calculated based on the taxpayer’s 2020 tax return or 2019 tax return if the former is unavailable to them. The payment 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. These payments will largely be made through direct deposit on July 15, August 13, September 15, October 15, November 15 and December 15.
Child and Dependent Care Credit
The American Rescue Plan (ARP) that was enacted in March 11, 2021 enhanced the child and dependent care credit for 2021.
The child and dependent care tax credit is a credit allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work. For purpose of this credit, a qualifying person is a dependent under the age of thirteen, or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year.
ARP made several changes to the child and dependent care credit for the 2021 tax year.
- The maximum percentage of child and dependent care expenses for which the credit may be taken has increased from 35% to 50%
- Qualifying work-related expenses have increased to
- $8,000 for one qualifying person, from $3,000 in prior years; or
- $16,000 for two or more qualifying persons, up from $6,000 in prior years.
- The phase-out structure is also changed so that many more families will get the maximum credit amount.
- Eligible taxpayer with an AGI of $125,000 or less will get a credit worth 50% of their qualifying expenses. The percentage is gradually reduced from 50% to 20% for people with an AGI between $125,001 and $183,001. It stays at 20% for families with an AGI from $183,001 to $400,000, but then it’s gradually reduced again from 20% to 0% for taxpayers with an AGI above $400,000. If AGI is above $438,000, the credit is zero.
- The credit is now refundable. In the past taxpayers who did not have a tax liability, did not benefit from this credit.
For more information please conatct Mariana Moghadam at mariana.moghadam@sobelcollc.com
