Are you ready to file your 2021 Federal Income Tax return?

Tax filing season for 2021 Federal tax returns opened January 24, 2022 and will run through April 18, 2022. With the expansion of the Child Tax Credit and Earned Income Tax Credit last year, there may be more money available to you than you realize! Here is what we think you need to know, links to frequently asked questions, and where to find more help. 

1. You may claim the Child Tax Credit even if you did not work or have income in 2021

You may claim the Refundable Child Tax Credit on your 2021 Federal income tax return even if you did not work or have any income. You must have lived in the United States for more than half of 2021 AND have a Qualifying Child with a valid Social Security Number. 

If you aren’t required to file taxes this year, you can visit GetYourRefund.org to get your tax credit.

Want to know more about the Child Tax Credit? Visit our Child Tax Credit help page

2. More people than ever before will qualify for the Earned Income Tax Credit

For the first time, workers 19-24 and 65 and older without kids at home now qualify for the tax credit, expanding eligibility to millions of additional workers nationwide.  Additionally, if you did not qualify in the past because your income was too high, you may now qualify.  Here’s what you need to know: 

  • You may qualify for a credit of more than $1,500 if you do not have children living with you.  
  • You may qualify for a credit up to $6,700 if you are raising children in your home.  
  • You may qualify if you make $27,380 or less without kids or $57,414 or less with kids. 

Want to know if you qualify?  Visit our Earned Income Tax Credit help page. 

3. The third Economic Impact Payment (“Stimulus Payment”) does not need to be included in your gross income on your 2021 Federal income tax return

This means when you file your tax return: 

  • You will not owe any tax on the Stimulus Payment you received. 
  • It will not reduce your refund.  

Note: The third Stimulus Payment will also not affect your income when determining your eligibility for federal government assistance or benefit programs. 

If the information reported on your 2021 Federal income tax return would cause you to have qualified for a lesser third Stimulus Payment (compared to your 2020 or 2019 tax information which was used to calculate the payment you received), you will not be required to pay any of it back.  

Missing your first, second, or third stimulus payments? Have more questions? Visit our stimulus payment help page. 

4. You may be eligible for free income tax return preparation

If your household income in 2021 was $58,000 or less, you could qualify to have your taxes prepared and submitted through the IRS Volunteer Tax Assistance (VITA) program. Local VITA Tax services will primarily be provided virtually this year, but a limited number of in-person sites are also available.   

Local VITA appointments

National VITA Services:

English: GetYourRefund.org

En español: GetYourRefund.org en español

If your household income was $72,000 or less, IRS Free File also lets you prepare and file your FEDERAL income tax online using guided tax preparation, at an IRS partner site or Free File Fillable Forms. There are options available in English and Spanish: Free File: Do your Federal Taxes for Free | Internal Revenue Service (irs.gov)

5. Be aware of fraudulent tax preparers

The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information.

  • DON’T use tax preparers who promise higher returns
  • DO choose a tax preparer that has a valid IRS “Preparer Tax Identification Number” (PTIN). 
  • DON’T fall for flyers and advertisements promising you “free money” from the IRS.  There is no such thing as “free money” from the IRS!
  • DO review your return before you sign it and make sure your preparer signs it too.

Learn more about how to stay protected

6. BONUS TIP: We are here to help!

If you:

  • have trouble with the IRS
  • need assistance with an audit
  • disagree with a tax bill the IRS has sent but they are still taking money from your paycheck

We are here to help!

Charlotte Center for Legal Advocacy’s North Carolina Low-Income Taxpayer Clinic serves all of North Carolina by offering tax controversy services to low-income taxpayers. The Tax Clinic serves taxpayers who earn less than 250% of the federal poverty standard, including people who speak English as a second language. 

Contact us today: 980.202.7329 

Resources

Filing your 2021 Federal Income Tax return: Child Tax Credit
Filing your 2021 Federal Income Tax return: Earned Income Tax Credit
Filing your 2021 Federal Income Tax return: Economic Impact Payment
Filing your 2021 Federal Income Tax return: Frauds & scams
Healthcare.gov Premium Tax Credits and Filing Your 2021 Taxes
Owe taxes but cannot pay?
IRS Payment Options

Filing your 2021 Federal Income Tax return: Child Tax Credit

Nearly every family is eligible to receive the expanded Child Tax Credit, including families that haven’t filed a tax return previously and families that don’t have recent income.

Each qualifying household is eligible to receive up to $3,600 for each child under 6 years old, and $3,000 for each child between 6 and 17 years old. The credit is not a loan!

Since the American Rescue Plan expanded eligibility and increased the amount of this tax credit for children, almost all families qualify. Even families who have not filed a tax return before or do not have recent income are eligible for the full Child Tax Credit. Anyone who has a child with a Social Security number (SSN) can get it, even if they do not have an SSN themselves. 

All you must do is file a tax return this year. Families who received monthly payments last year will get the second half of the credit when they file taxes this year. If you missed out on payments during 2021, you will still get the full credit when you file your taxes this year.

If you are filing for the first time, or have additional questions, visit GetYourRefund.org, call 211 or make an appointment with your local Taxpayer Assistance Center to learn more about how to get your money!

I have children but didn’t work in 2021. Can I claim the Child Tax Credit?

You may claim the Refundable Child Tax Credit on your 2021 Federal income tax return even if you did not work or have any income. You must have lived in the United States for more than half of 2021 AND have a Qualifying Child with a valid Social Security Number.

Visit GetYourRefund.org to get your tax credit.

Remember: Any refund you receive because you claimed the Refundable Child Tax Credit is not counted as income when determining your eligibility for federal government assistance or benefit programs.

IRS Quick Info Guide

Do I have to repay my Advanced Child Tax Credit?

If you received an Advance Child Tax Credit payment in 2021 but had changes to your family, income, or living situations, then you may have to repay some or all the amount you received to the IRS. 

The amount of Advance Child Tax Credit payments sent in 2021 was based on an estimate of the amount of Child Tax Credits you could claim based on your:

  • Income
  • Filing status
  • Residence
  • Number of dependents.

If your situation changed after you received payments, then the IRS MAY have overpaid you and you may have to repay the IRS by reporting the overpayment on your 2021 tax return. 

Is there help for families & individuals who must repay the Advance Child Tax Credit?

The Repayment Protection Plan can help low-income families and taxpayers.  It is particularly beneficial to families and individuals who had a change in the number of qualifying children in 2021, such as divorced parents with children. 

To qualify for full Repayment Protection and not have to pay back any overpayments, you must meet the following requirements:

  • your main home was in the United States for more than half of 2021 AND
  • your modified adjusted gross income (AGI) for 2021 was:
    •  At or below $60,000 (married filing joint or qualifying widow or widower)
    • $50,000 (head of household)
    • $40,000 (single or married filing separate). 

The Repayment Protection amount is then phased out, or lowered, as your modified AGI gets higher.  If your modified AGI was at or above $120,000 (married filing joint or qualifying widow or widower), $100,000 (head of household), or $80,000 (single or married filing separate) then the Repayment Protection is capped, and you will have to pay back all excess payments. 

To find out more about Repayment Protection and the Advance Child Tax Credit, visit: https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-frequently-asked-questions

Resources

The 2021 Child Tax Credit | Information About Payments & Eligibility
Determining Your Family’s Child Tax Credit Eligibility | Age & Income
Free Income Tax Preparation Resource: VITA Sites

Child Tax Credit 2021 Update: Advanced Payments

**Updated October 15, 2021. Original Post June 25, 2021.**

There have been important changes to the Child Tax Credit (CTC) that will help many families receive advance payments this summer. In order to receive the new credit, you may need to take some steps to ensure you get the funds. Families who are filing taxes and do not currently receive the Child Tax Credit must take action before October 15, 2021, otherwise you will have to wait to receive the credit when you file your taxes in 2022.  If your family does not earn enough to file taxes, and you want to get the child tax credit in monthly payments now, you must enroll online by November 15, 2021.

The CTC is a tax credit that taxpayers can get for each qualifying dependent child on their tax return. A tax credit directly reduces the amount of taxes you owe, giving you a dollar-for-dollar reduction of your tax liability. The CTC in 2021 is a fully refundable tax credit, meaning that eligible families can receive it, even if they owe no federal income tax. Before this year, the refundable portion of the CTC was limited to $1,400 per child. 

The American Rescue Plan has expanded the CTC for the 2021 tax year. These changes will only apply for the 2021 tax year. The CTC has been revised in the following ways: 

  • An increase to $3,600 per qualifying child under the age of 6.  
  • An increase to $3,000 per qualifying child between the ages of 6 and 17.  

Is My Family Eligible for the Credit?

Your family qualifies for the credit if:

  • The child is your son, daughter, grandchild, stepchild or adopted child; younger sibling, step-sibling, half-sibling, or their descendent; or a foster child placed with you by a government agency.
  • The child was under 17 at the end of 2020.
  • The child has a valid Social Security Number.
  • The child lived with you for more than half of 2021.
  • The child did not provide over half of their own support for 2021.

To Qualify 
Filers must have had a 2019 or 2020 adjusted gross income below the following levels to qualify for the full monthly payment: 

  • $75,000 for individual taxpayers 
  • $112,500 for heads of households
  • $150,000 for married taxpayers filing jointly and widows/widowers

What to Expect  

  • The Internal Revenue Service (IRS) has started sending out letters to let families who it knows, based on tax returns, might be eligible to receive advanced monthly CTC payments beginning July 15.   
  • Eligibility is based on either a filers’ most recent tax return or information submitted to the IRS using the simplified sign-up tool.  
  • Families eligible for advance CTC payments will receive a second, personalized letter listing an estimate of their monthly payment.   
  • The advance CTC payments are worth up to $300 per month for each qualifying child under the age of six and up to $250 for each child between the ages of 6 and 17.  
  • The IRS will pay half of the total credit through the advanced monthly CTC payments and pay the other half of the credit when the taxpayer files their 2021 tax return.  
  • Taxpayers can verify their eligibility for the payments or opt-out of the advanced payment program by visiting the IRS Child Tax Credit Update Portal.  
  • For more information about the unenrollment process, including a schedule of deadlines for each monthly payment, visit the IRS FAQ page.

Eligibility is Determined from 2020 or 2019 Tax Returns   

Filers who have filed a return in either 2019 or 2020 will not need to do anything. The IRS will take the information from those tax returns to determine eligibility for the advanced CTC payments. The IRS will only use a 2019 return if a 2020 return has not been filed or is otherwise unavailable to use.  

What about Filers who don’t regularly file taxes?  

Filers who have not filed for 2019/2020 may register online with the IRS simplified sign-up tool. This tool will allow non-regular filers to provide the IRS with the basic information needed to determine if they qualify for the CTC.  

Who should unenroll?

Instead of receiving the advanced monthly payments, some families may prefer to wait until the end of the year to receive the entire credit as a refund when they file their 2021 tax return.

The unenroll feature may also be helpful to some families that no longer qualify for the Child Tax Credit or believes they will not qualify when they file their 2021 tax return. This could happen if, for example:

  • Their income in 2021 is too high for them to qualify for the credit
  • Someone else (an ex-spouse or another family member, for example) qualifies to claim their child or children as dependents in 2021
  • Their main home was outside of the United States for more than half of 2021

What About Immigrant Families?

You can apply for and receive a tax credit with NO negative effect on any immigration application you might file. Immigration does NOT ask about tax credits or consider them negatively in your immigration application process.

Is a Social Security Number Needed to be Eligible for the CTC?  

Parents are not required to have a social security number to be eligible for the CTC. However, parents must have an Individual Taxpayer Identification Number (ITIN) to claim the CTC for their eligible children.   

Do Children need to have a Social Security Number to Qualify for the CTC?  

Yes. The CTC is only available for children 17 years and younger with social security numbers.   

What about Dependent College Students?  

Dependent college children who are under the age of 24 at the end of the tax year, who are full-time students for at least five months of the year, and who are younger than the tax filer may be considered a qualifying child for the Earned Income Tax Credit (EITC). The EITC is a tax break that helps low to moderate-income taxpayers.

For more information, visit the IRS EITC page: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc.   

Additionally, dependent college children may be claimed for a $500 non-refundable tax credit as an Other Dependent Child. Claiming an Other Dependent Child will not affect advance CTC payments but may affect a qualifying filer’s 2021 tax return.  

How to Receive CTC Payments?  

The IRS is calculating this payment based on the most recent of 2020 and 2019 returns. Potentially qualifying filers should file their tax return as soon as possible to receive the CTC.  Filers who have not filed for 2019/2020 may register online with the IRS simplified sign-up tool. Families who are not currently receiving the Child Tax Credit must take action before October 15, 2021, otherwise you will have to wait to receive the credit when you file your taxes in 2022. 

Advanced CTC Payment Options  

  • The IRS will be using information from tax filers’ most recent tax returns or from non-filers tools to send out advanced monthly CTC payments. Eligible families will receive the advanced payments by direct deposit or check.   
  • Direct deposit is available to tax filers who include their bank information and select it as an option.  
  • Filers can also elect to have advance CTCs mailed out.  

How to update direct deposit information

To update direct deposit information, families should use the Child Tax Credit Update Portal to provide the IRS with their most recent bank account information to receive their monthly payments.

To change the bank account receiving the advanced payments, update the routing number, account number and indicate whether this is a savings or checking account. The advanced payments will start going to this updated account August 13.

It is important to note that the advanced payments can only be direct deposited into one account.

How to switch from paper check to direct deposit

The Child Tax Credit Update Portal will indicate whether families are enrolled to receive their advanced payments by direct deposit. If they are not enrolled to receive their advanced payments by direct deposit, they will receive a check each month.

To receive the advanced payments by direct deposit, they can use the Child Tax Credit Update Portal to add their bank account information. The Update Portal will need their routing number, account number, and indicate if this is a savings or checking account.

The IRS urges any family receiving checks to consider switching to direct deposit. With direct deposit, families can access their money more quickly and eliminates the chance of a stolen, lost, or undelivered check.

Watch Out for Scams  

The IRS urges everyone to be on the lookout for scams relating the advanced CTC payments. The only way for eligible families to get the advanced CTC payments is to have filed a tax return with the IRS or registered online through the non-filers signup tool, which can only be done on the IRS.gov website. These are the only two ways to get the advanced CTC payments; any other option is a scam.  

People who receive emails, phone calls, or text messages related to advanced payments should be cautious. The IRS never sends electronic communications, which were not requested, to anyone asking them to open attachments or visit non-governmental websites.  

For more information on how to protect yourself from scams, visit the IRS Tax Scams page. This webpage provides information on how scammers might target you to obtain your personal information or money. 

We are still waiting on additional details from the IRS and will update our website with more information. For more information about the CTC, visit the IRS advanced CTC 2021 page at IRS.gov/childtaxcredit2021 or their FAQ page.