How does Advance Child Tax Credit work?

Everything you need to know

About the new advance child tax credit change

The American Rescue Plan Act (ARPA) expands the Child Tax Credit (CTC) this tax year as the Advance Child Tax Credit. Families with CTC information on their 2019 or 2020 federal income tax return received an advance payment on July 15, as well as those who used the nonfilers tool to sign up for the Economic Impact Payment.

Key Advance Child Tax Credit payment details:

• The credit amounts will increase for many taxpayers.
• Your customers may receive part of their credit in 2021 before filing their 2021 tax return.
• Payments are automatically issued by check or direct deposit in bank accounts.
• The total of the advance monthly payments are up to 50% of the 2021 Child Tax Credit.
• The credit for qualifying children is fully refundable (customers without earned income).
• The disbursement is up to $300 per month for each qualifying child under age six. Each qualifying child ages between six to 17 receive up to $250/month, including those who turn 17 this year.
• The payments will be issued on August 13, September 15, October15, November 15 and December 15.

What changes will bring the Advance Child Tax Credit to your customers?

Customers might confuse the stimulus payments received in the past year with the 2021 Child Tax Credit. However, these are two different payments issued by the government.

Families that qualify should understand that the child tax credit payments could reduce tax refund amounts next tax season on an average of  $2000.

Steps you can take to help your customers get the tax refund they want:

About 36 million families may be eligible for the Advance Child Tax Credit payments. The IRS will send out two letters to families that qualify. The first letter notifies them that they might meet the required criteria. The second letter confirms their eligibility and gives them the estimated child tax credit amount.

Recently, the IRS launched two tax credit update portals. The tools help manage the advance child tax credit payments through the Eligibility Assistant and the Unenroll from Advance Payments.

The Eligibility Assistant is a child tax credit calculator that shows if your customer qualifies for the Advance Child Tax Credit. On the other hand, the Unenroll portal allows families to manage their monthly payments, including opting out.. This way they can receive a lump sum when they file their tax return next year. For those who filed a joint return, both parents must unenroll.

How to use the Child Tax Credit portal?

This summer, your customers will be able to change their info in the CTC portal that was entered last time they filed taxes. A good example of the reason they would need this would be having a baby. These would be scenarios where the IRS might not have these details on file yet.

Your customers will be able to update their mailing address, change the number of qualifying children, their marital status, or income. Customers can also reenroll in monthly payments if they previously unenrolled or opted out.

How to access the Unenroll Portal

To view or update the portal, customers will need to use their IRS login credentials or an ID.me account.  The IRS partnered with ID.me to provide peace of mind to all parties involved in the advance payment transactions. ID.me is a secure identity network that allows individuals and businesses to prove their legal identity online. Remind customers to have their photo identification ready when they create their accounts online, and customers filing jointly will each need an account.

Forms of ID accepted:

• Driver license
• State ID
• Social security number, or card
• Phone number
• Valid email address in case they need to set up an IRS or ID.me account

New accounts can be created using the links below:

• ID.me registration
• IRS Sign Up

Here’s how you can start the Advance Child Tax Credit conversation

Excellent customer service comes in the form of education and guidance. That will help you create a positive customer experience.

Start the process by checking your CTC client list. Verify the contact information in your tax software and decide how you want to communicate the news.

Reach out to your CTC eligible customers and explain what this means to them. Some of your customer might think they received another stimulus check when that’s not the case. Point out that you can help them make the right decisions for their tax refund situation, and then walk them through the online account set up process on the right websites.

For more details, visit the 2021 Advance Child Tax Credit page.