AMERICAN RESCUE PLAN

$3,600 child tax credit: how often will it be paid? Monthly?

The American Rescue Plan calls for the 2021 Child Tax Credit to be paid out monthly starting in July, however the IRS has warned that might not be possible.

$3,600 child tax credit: how often will it be paid? Monthly?
AMIRA KARAOUD REUTERS

This year families with children will be looking forward to a bit of extra help covering the cost of raising their children. The $1.9 trillion American Rescue Plan (ARP) enacted in March included an enhanced Child Tax Credit that could see families receiving up to $1,800 in direct payments before the end of the year.

Congressional Democrats convinced the Biden administration to greatly expand the number of families and the amount they can receive under the tax provision. However, when speaking to Congress the Internal Revenue Service (IRS) chief, Charles Rettig, expressed doubts about the ability of his agency to roll out the full provisions within the timeline stated in the law.

The IRS is dealing with a heavy workload

President Joe Biden’s first major legislative priority since taking office included a number of new tax provisions that gave more work to an already taxed IRS in the middle of the 2021 tax season. The agency is still trying to process the backlog that it had from last year with some 2.4 million individual tax returns filed before January 2021 yet to process on top of another 7.3 million returns. The IRS has extended the 2021 tax filing deadline to 17 May to "help taxpayers navigate the unusual circumstances related to the pandemic."

The American Rescue Plan passed by the Democrats calls for $10,200 in unemployment benefits from taxable income in 2020 to be waived, which the tax agency must go back and retroactively exempt. At the same time the law approved another round of direct stimulus payments for $1,400 this time round which Commissioner Rettig says it must finish before the agency’s IT staff can set up the online portal for the child tax credit program.

When will the direct child tax credit payments be made?

Although the ARP directs the IRS to begin sending out payments monthly in July the law gives the Treasury Secretary some leeway to let the tax agency make the payments at longer intervals. It is up to the discretion of the Secretary Janet Yellen to decide what will be feasible for the IRS.

In a statement the IRS said that information “will be made available as soon as possible on IRS.gov.” The tax agency “strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.”

What are the provisions of the 2021 Child Tax Credit?

The new system provides a fully-refundable tax credit which means that even if a filer paid less in taxes than the value of the credit, they will receive the money as a tax refund. The enhanced credit is $3,000 for each child aged from 6-17 and $3,600 for each child under the age of six, but only for the 2021 fiscal year. Families could receive a payment of $300 per child under 6 and/or $250 per child under 18 per month. The provision calls for the payments to go out monthly starting 1 July, through December.

Ideally families would receive half of the credit in 2021 through direct payments, similar to how the $1,400 stimulus checks in the same bill are sent. The remainder, $1,800/$1,500 per child, would be available to families as a rebate when they file their 2021 income-tax filing in 2022.

Third stimulus check: latest updates

You can get the latest information on the third stimulus check, and updates on the possibility of a fourth direct payment, by following our dedicated live blog.

You'll also find news on other provisions in Biden’s economic-aid package, such as an enhanced child tax credit that offers qualifying families up to $3,000 per child aged six to 17, and $3,600 per child below six.