Simplified tax returns listing personal information should be filed with the IRS to claim the monthly and advance payments of the expanded child tax credit, the agency said in Revenue Procedure 2021-24, which was released Monday. The return can be filed on paper or electronically and can also be used to receive the third round of economic impact payments and to claim recovery rebate credits for the first two rounds of pandemic relief payments, according to the guidance.
"To allow individuals who are not required to file a federal tax return or wish to file a federal tax return electronically to receive advance child tax credit payments, third-round economic impact payments, the 2020 recovery rebate credit, and the additional 2020 recovery rebate credit, the IRS needs certain information about these individuals that would ordinarily be provided by a federal tax return," the IRS said.
The agency also provided guidance for people looking to claim the benefits but who can't file electronically because they have zero adjusted gross income.
The American Rescue Plan Act
signed by President Joe Biden in March made the child tax credit fully refundable and increased it to $3,000 per child over 5 and under 18 and to $3,600 per child under 6. That legislation also authorized the IRS to issue regular advance payments of the credit and allowed it to be claimed for 17-year-olds. It also expanded the earned income tax credit, another anti-poverty provision in the tax code.Biden announced on Monday that nearly 39 million American households will begin receiving monthly payments of the credit beginning in mid-July. The increased credit amounts are phased out for incomes over $150,000 for married taxpayers filing jointly and qualifying widows or widowers, $112,500 for heads of household and $75,000 for all other taxpayers, the IRS said.
Eligible families will not need to take any action to receive the refundable tax credit payments on the 15th of each month in amounts of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above, the IRS and U.S. Department of the Treasury said in a statement Monday. Payments will be made through direct deposit, paper checks or debit cards, but they won't be delivered on weekends or holidays, the statement said.
Advance payments will total up to 50% of the child tax credit, and eligibility will be based on information included in 2020 tax returns, or 2019 returns if 2020 returns haven't been filed yet, the IRS said. People who earn under $12,400 annually, however, are ordinarily not required to file tax returns.
The IRS guidance released Monday allows people who normally don't file returns to use simplified return procedures to receive the expanded child tax credit. That guidance requires people to file a Form 1040, Form 1040-SR or Form 1040-NR, to report personal information like Social Security numbers and mailing addresses on the returns and to write "Rev. Proc. 2021-24" on the forms, according to the agency.
The IRS will use the information provided to compute the advance child tax credit amount as well as the third round of economic impact payments, which were set at $1,400 by ARPA. The simplified return procedures can also allow people who didn't receive the first of $1,200 payments under the Coronavirus Aid, Relief and Economic Security Act
or the second round of $600 payments under the Consolidated Appropriations Act to claim recovery rebate credits in those amounts, the agency said.Revenue Procedure 2021-24 also provides guidance for people who have zero adjusted gross income to file their returns electronically. While such filers normally can't file electronically because of limitations in tax preparation software, they can indicate on the Form 1040 that they had $1 in AGI in order to receive the advance child tax credit payments and the third round of economic impact payments, the IRS said.
In late March, the House Ways and Means Committee chairman, Rep. Richard Neal, D-Mass., introduced legislation to extend permanently ARPA's changes to the child tax credit, which are currently set to expire at the end of the year. That legislation would also preserve changes made to the earned income tax credit, which include increasing the maximum credit amount for childless workers from around $540 to roughly $1,500.
Biden has also called on Congress to extend the tax relief as part of his American Families Plan.
An IRS representative on Tuesday declined to comment beyond the guidance in the revenue procedure.
--Additional reporting by Stephen Cooper. Editing by Vincent Sherry.
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