Core Financial Resources

2021 Child Tax Credit (4th Stimulus?)

Tax

2 min read

As part of President Joe Biden’s $1.9 trillion coronavirus relief package, eligible families can receive as much as $3,600 for each child under the age of 6. This represents an 89% increase over 2019’s amount. For children between ages 6 and 17, the credit is now $3,000. Previously children age 17 were not included in the Child Tax Credit at all.

Additionally, Congress has asked the IRS to sent part of this increased credit to taxpayers monthly beginning July of 2021. Some media outlets have called this a 4th stimulus. Beware that these payments are VERY different than the earlier 3 stimulus payments.

  • If you take the child credit check now rather than at year end your tax refund will be reduced because you already received the money. Many people who plan on that refund will get a surprise at year end.
  • What happens if you get the tax credit and are not entitled to it because the child is no longer your dependent at year end? You get the pleasure of paying the money back to Uncle Sam after you already spent it.
  • We also don't know how IRS is going to notify you at year end how much tax credit you already received so if your records don't match theirs when you file your tax return, things get held up until you and IRS agree on the credit already received.

For most people, we recommend opting out of the payments via the IRS website: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal . Unfortunately the IRS did not give us much advance notice of the opt-out procedure. We’ve personally gone through the process and it worked. However, we’ve heard stories of others having difficulty. Don’t expect the process to be speedy. When you start, make sure you have your cell phone, your patience, and your tech savvy friend/spouse.

Finally, note this is all temporary. The increased tax credit AND these payments are set to revert back to their old ways for 2022 unless Congress acts. We understand extending these benefits is a high priority for the current administration.

Notice: This generic information is not intended to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary (by industry, entity type, and locale), consult your accountant, lawyer, and/or HR expert for specific guidance.
Scott Patterson

Scott Patterson

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