Although lawmakers and advocates continue to debate the possibility of a fourth stimulus check or even ongoing recurring stimulus funds, millions of American families will soon be receiving a different type of monthly assistance: payments of up to $300 per month, per child from the IRS as part of the expanded Child Tax Credit for 2021.
If you have a child under 17, you can expect to receive thousands of dollars this year and into 2022 from the IRS. Here’s what you need to know about the timeline for the payments, the amount you can expect and how to set your preferences for the payments with the IRS.
When Will the IRS Start Distributing Payments?
The IRS is now finishing distribution of the third, $1,400 stimulus checks, and taxes are due May 17th. Once both of those tasks are completed, the IRS will be able to devote themselves fully to handling the Child Tax Credit.
The agency is on track to begin monthly payments of $250 (or $300 for children under six) for millions of families starting July 1, according to IRS Commissioner Charles Rettig. The monthly payments will continue until the end of 2021, and then parents will claim the rest of the credit as a lump sum on their taxes.
How Much Will Families Receive?
The 2021 Child Tax Credit is for $3,000 per child, or $3,600 per child for children under six. Like stimulus checks, however, the Child Tax Credit has income thresholds.
Single parents earning up to $75,0000 qualify for the full payments, and couples earning up to $150,000. Parents with no income, who do not normally file taxes, are eligible for the credit.
Above those thresholds, the payments taper off: the enhanced payment phases out completely for individuals earning $95,000 or for couples earning $170,000.That doesn’t mean that you won’t receive anything, however!
Even families who don’t qualify for the enhanced credit would be able to claim the standard $2,000 Child Tax Credit on their taxes as usual if their income is below $400,000 (the current threshold for the credit).
You can calculate how much you might receive with the free Child Tax Credit calculator from Kiplinger.
Can You Choose One Large Payment Instead of Monthly Installments?
If you’d rather receive one large, lump sum of up to $3,600, you can choose to opt out of the monthly payments and instead claim the full amount on your tax refund after paying your 2021 taxes.
The IRS is planning to open a portal for the Child Tax Credit in July, where you’ll be able to set your preferences for the payments and update any necessary information like a change in address. If you don’t choose to opt out of the payments, you’ll receive 7 monthly installments $250 per child or $300 for children under six, and then claim the rest of the credit on your taxes.
Will the Enhanced Credit Extend Past 2021?
The current Child Tax Credit enhancement is just for this year. However, President Biden is reportedly planning to request extending it until 2025 in his American Families Plan, which is a funding package for children and families that will be released later this week.
The President has already stated that eventually, he would like to see the credit become permanent. It’s expected that the expanded Child Tax Credit will reduce childhood poverty by nearly half, and many advocates are pushing lawmakers to extend it.
Conclusion: Child Tax Credit Funds Will Be Arriving Soon
The IRS will need to hire about 500 new employees to process the Child Tax Credits, according to Commissioner Rettig. However, the agency says they are on track to get payments out to families this summer. Families can expect to receive their monthly payments in July if all goes well, and in the meantime we will keep you updated on the latest news here on the Skip Blog.
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