The CTC has been federal law since the mid-1990s, but last year’s expansion added several improvements that lifted approximately half of children out of poverty. It did that by making the tax “refundable’ meaning families could benefit even if they did not have enough “earned-income.’ It also added an innovation to make it more immediate: have the IRS issue the tax refunds each month. This new benefit was for the entire year, but it did not start until July 2021 and thus families are eligible for the CTC from January through June.
This can potentially benefit “child welfare families.” If you were a foster parent for the same child or children for more than six months you can qualify for the credit (just as you used to be able to receive the tax deduction if you cared for the child for more than half the year). You do need a Social Security number for the child.
Families who adopt can also qualify for the CTC but again the parents must have a Social Security number for that child. In the past families who adopt a child but did not have a Social Security number for that child for various reasons, could still apply to the IRS for an “ATIN” or Adoption Taxpayer Identification Number. Unfortunately, due to changes made to tax law under more recent tax reforms before the pandemic, adoptive families cannot use the ATIN to claim this credit (although the ATIN can be used for other child-related tax credits).
The CTC can also benefit kin/relative caregivers. Again, if the majority of support was provided by the relative caregiver and they caretaker meets the IRS relative definition found in the instructions.
Center for Law and Social Policy (CLASP) has published: What Families Need to Know about the CTC in 2022 | CLASP. As pointed out by CLASP to get the remaining half of the credit eligible families must file a tax return this year.
So, if a parent made little or no income last year—they are still eligible for the CTC and must file a tax return to get it. Parents who did not receive the monthly payments by their own choice or because they failed to make adjustments through the IRS website will need to file a tax return to get their entire 2021 CTC payment. One child may result in a $3600 credit (under age 6) or $3000 (6 through 17 years).
Parents should also file their tax return to claim new babies who were born in 2021 or any other children for whom they didn’t get advance payments in 2021. Even if a baby was born as late as December 2021, that baby would still be eligible for the full $3,600 CTC payment when their family files a 2021 tax return.
The permanent CTC that CWLA and other groups are fighting for would allow the credit monthly and allow that credit to be moved with the child but that is not how the 2021 version operated because it was a modification of existing law—thus the problem with not allowing adoptions with an ATIN to qualify.
As the CLASP paper indicates:
“If families get a letter from the IRS saying how much they received from the advance CTC, they should keep the letter because it will have important information for filing their 2022 return. The IRS will send Letter 6419 to all families who received the advance CTC payments indicating how many monthly CTC payments they received and how many children in the household were eligible. The IRS will mail the letter to the address it has on file for the family. Families can also log on to the IRS CTC Update portal to look up this information. If the number of the total CTC payments the parent enters on the 2021 tax return doesn’t match what the IRS has on file, this may delay their refund.
Parents or caregivers can receive the portion of the 2021 CTC they have not received by filing IRS Tax Form 1040 or 1040-SR. There are several free ways to file taxes online or to receive in-person support from community partners when filing a return.
CWLA will be working with members and others to make sure families file so they can receive the other half of the 2021 CTC and hopefully Congress will have been able to address a continuation. Due to growing backlogs for the IRS, families that use electronic filing and have a bank account where the refund can be deposited instead of being mailed out will be able to receive their refund much earlier.
Options for tax assistance include:
- IRS Free File (available to people whose income was $72,000 or less in 2021).
- IRS’s Volunteer Income Tax Assistance (VITA) (generally available to people who make $57,000 or less, those who have disabilities, and those who speak limited English).
- MyFreeTaxes; and
Tax filing season is being delayed again this year and responses are expected to be even longer due to a combination of the pandemic and Congress’s ongoing underfunding of the IRS. You cannot start to file until January 24, 2022, for tax year 2021 (unless you use the IRS Free File which opens on January 14, with tax returns held and then transmitted to the IRS starting January 24.)
The filing deadline to submit 2021 tax returns or an extension to file later and pay tax owed is Monday, April 18, 2022, for most taxpayers. This has been delayed during the pandemic. Again, people who do not owe taxes and who don’t have to file will need to file to obtain a refund.
The IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit and there are no issues with their tax return. To avoid delays in processing, people should avoid filing paper returns wherever possible.
Getting the CTC payment will not change your eligibility for programs like Medicaid, the Supplemental Nutrition Assistance Program (SNAP), or Supplemental Security Income (SSI)