While the child tax credits set to start going out Thursday may sound like great news to parents across the country, there are a couple catches to look out for. For more on that, Jimmie Johnson sat down with Bobbi Rebell, a certified financial planner and host of the “Money Tips for Financial Grownups” podcast.
“Well, first of all, it is good news that many Americans–in fact, the majority of Americans–are going to be receiving benefits from this child tax credit,” Rebell said. “And what’s new this year is that there will be an advance, so you’ll be getting half of that before your tax return goes in.”
The second half of the credit will appear on next year’s tax return. “Many people are expecting to get these checks for $3,600 per child, that’s not going to happen,” Rebell said.
What will happen is half the money parents are expecting will be divided into six payments. “If you get direct deposit from your tax returns, [the payment] should be direct deposited into your accounts with a much smaller amount than you expect,” Rebell said.
She is also warning parents that when sending out the child tax credits, the IRS will look at their tax returns from 2019 or 2020, as opposed to forecasting 2021 returns.
“They don’t know what you’re gonna make. So there’s a possibility that you may not qualify in 2021 you’re gonna have to pay the money back,” Rebell said. “So think ahead. You may want to defer receiving it if you don’t like the idea of having to pay back the money.”
According to the IRS, parents qualify for the credit if they meet the following criteria:
- They’ve filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return or given the IRS their information in 2020 to receive the Economic Impact Payment using the “Non-Filers: Enter Payment Info Here” tool;
- They have a main home in the United States for more than half the year, or they filed a joint return with a spouse who has a main home in the United States for more than half the year;
- They have a qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number;
- They made less than certain income limits.