Millions of Families Will Receive Monthly Payments From the IRS Soon

stimulus Mar 15, 2021

Childhood poverty is a longstanding issue in the U.S. and social distancing protocols have exacerbated the issue, as parents struggle to balance employment with fewer childcare options and many children still in distance learning. Included in the recently-passed stimulus bill is a plan to help ease the burden on families in addition to individual stimulus checks: payments of up to $300 a month per child through an expansion of the existing Child Tax Credit.

The new credit will provide a total of $3000 this year for all children under 17 and $3600 for children under six. Here’s what you need to know about the payments.

How Will the Payments Be Distributed?

The 2020 Child Tax Credit is up to $2000 per child, and is claimed at the end of the year when parents file their taxes. For 2021, the credit will be upped and the IRS will also send out monthly payments starting in July, so that parents don’t have to wait for tax season to claim the funds.

From July through December of 2021, eligible parents will receive a monthly payment of $250 per child or $300 for children under six, and then they would claim the rest of their credit on their taxes. Parents would be able to receive the payments whether or not their families qualify for a standard tax refund.

“We are making the Child Tax Credit more generous, more accessible, and by paying it out monthly, this money is going to be the difference in a roof over someone's head or food on their table," said Representative Richard Neal, who led the crafting of the legislation.

Who Will Qualify?

Like the $1400 stimulus check proposal, the monthly child tax credit payments would be targeted toward low and moderate-income families. Single parents earning up to $75,0000 would qualify for the full payments, as would couples earning up to $150,00. Above those thresholds, the payments would taper off in the same way stimulus checks do; the enhanced payment phases out completely for individuals earning $95,000 or for couples earning $170,000.

However, even families who don’t qualify for the enhanced credit would be able to claim the standard $2000 Child Tax Credit on their taxes as usual if their income is below $400,000 (the current threshold for the credit).

Will Overpayments Have to Be Paid Back?

It's possible that with advanced payments, some families will receive more in Child Tax Credit funds than they are actually entitled to. To protect parents from having to return money to the IRS, the bill includes a provision that single parents earning $50,000 or less (or two-parent households earning $60,000 or less), will not have to return any extra funds they receive. Above that threshold,  families may have to repay part of what they owe, and taxpayers earning $80,000 or above will be expected to return all extra funds they receive.

Will the Changes to the Tax Credit Be Permanent?

The enhanced tax credit legislation in the stimulus package will only up the credit for 2021. However, Democrats are also working to pass parallel legislation which would make the changes permanent. Lawmakers have argued that making the payments permanent could reduce child poverty in the U.S. by as much as 50%.

Conclusion: Enhanced Payments Will Be Reaching Families Soon

This summer, millions of families can expect to receive direct deposits for hundreds of dollars from the IRS. We will keep you updated as the payments begin, and in the meantime, make sure you have downloaded the Skip app (free on the App Store or Google Play), so you can receive push notifications on the latest stimulus and government news, including progress on the third, $1400 stimulus check, unemployment boosts and more.

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