The American Rescue Plan is set to send payments to parents as a part of a revised child tax credit, but the credit comes with some confusion. To help clear things up, we spoke to CPA Tom Wheelwright, the CEO of Wealthability.
According to Wheelwright, there are two main changes to this year’s child tax credit.
“One is when you get it because they’re going to start paying it early and the second is the amount of the credit and who qualifies for that increased amount. Historically, the credit was 2,000 dollars a child. Now, it’s up to 3,600 dollars a child and now, you can have a 17-year-old. Before, you could only have 16 and under. They’re going to start paying it in July, so there’s really a lot of changes and it’s just for this year, although the Biden administration would like to make it more permanent,” Wheelwright said.
This tax credit is for 2021 and it’s based on the most recent tax return you’ve filed, according to Wheelwright.
“If you don’t qualify in 2021, but you get the credit because you would’ve qualified in 2020, you have to pay it back. So you get this advanced payment, you could be in trouble,” Wheelwright said.
To make these changes, you won’t have to wait until next year’s tax return. According to Wheelwright, the IRS is setting up a portal where you can make changes relating to this tax credit.
Age Credit Breakdown
Children of different ages equate to different credits. The child’s age is based on the age they turn in 2021.
- Children between the age of 6 and 17, get up to $3,000
- Under six, get up to $3,600