AMERICAN RESCUE PLAN

When will the monthly Child Tax Credit start?

The IRS are still overseeing the distribution of the third stimulus check and a busy tax season, sparking fears that the new CTC payments may be delayed.

When will the monthly Child Tax Credit start?

The new-look Child Tax Credit programme was one of the key inclusions of the American Rescue Plan, which President Biden hopes will provide much-needed support for families across the country.

The new provision will see monthly payments of up to $300 per child sent to parents to help with child-raising expenses and marks a significant departure from the previous system. In the past, the Child Tax Credit (CTC) was a single annual tax rebate worth a maximum of $2,000.

The Center on Budget and Policy Priorities projects that the new programme could lift four million children out of poverty in the United States, but with the IRS forced to focus on other priorities there could be a wat for the monthly payments.

IRS chief admits there could be a delay in Child Tax Credit

Despite Biden’s ambitious plans for the new system, it will take some time to get the huge federal system in place to distribute the monthly payments and there are concerns that the rollout could be hampered.

As a tax credit, the CTC will be administrated by the IRS. However they are also attempting to distribute the third round of stimulus checks and are in the middle of a busy tax season. In recent weeks they have been forced to extend the tax return deadline by a month to 17 May to ensure that filers are able to get their returns in.

However in a hearing with the House Ways and Means Committee last month, IRS Commissioner Charles Rettig pointed out that this will give the agency less time to implement the new CTC system. The CTC distribution hinges on a new online portal that the IRS hoped to have in place by 1 July, but Rettig now admits that may not be possible.

“The same people who do our income tax [and stimulus check] processing are the people who need to develop that portal, so I don’t have the resources to devote to that portal until filing season ends,” Rettig told the Committee. “We now have one month less to do the development.”

He added: “We intend to do our best to get there… I’m hopeful that I don’t have to come to the committee to say that we’re unable to meet the statutory requirement” of launching the new CTC system by 1 July.

Child Tax Credit payments will be split over two tax years

The new programme will provide monthly payments of up to $300 for children under six and $250 for those aged between six and 17. However the structure of the payments is complicated slightly by the mid-year introduction.

The IRS will work to implement the new system as swiftly as possible but with only 12 months’ worth of provision agreed so far, the second half of the payments will take place next year. This means that they will take place across two tax years.

The IRS has not yet published an exact timetable for the payments but CNET report that recipients could get the second half of the money as a single tax rebate, similar to the old-style CTC. They say:

“The amount you receive will be half of what you're owed for the year under the new stimulus bill, and you will receive the other half of the payment with your 2021 tax refund, filed in 2022.”