IRS $3,000 child tax credit: when will the monthly payments begin?
The IRS has been tasked with setting up an online portal for the Child Tax Credit and begin disbursing up to $300 per child in monthly payments by July.
When the American Rescue Plan was passed in March, it included several measures to help struggling American families. One of the measures that households began seeing immediately were the $1,400 stimulus checks which around 159 million have been distributed. But this summer families will begin seeing another direct payment coming their way.
The $1.9 trillion covid-19 relief bill also includes an enhanced Child Tax Credit that will send parents monthly direct payments for each child 17 and younger they claim for tax purposes. If everything goes as planned, the IRS will meet its deadline to begin those payment in July.
How will the child tax credit payments be made?
The exact specifics of how the payments will be made have yet to be announced by either the Internal Revenue Service (IRS) or the US Treasury. In testimony to the Senate Finance Committee, Commissioner Chuck Rettig stated that the IRS expects to have the online portal for the program up and running for the July launch. Soon thereafter the agency will begin sending families their payments. The IRS will automatically sign families up based on the information the agency has even if they didn’t claim the credit when they filed. But those who normally don't file will have to file a 2020 tax return this year for the IRS to have a record of the number of children and dependents the taxpayer will claim.
Through the online portal families will be able to decide whether they wish to receive half the total credit as monthly payments and claim the remainder on their 2021 tax return, or if they wish to receive the lump sum as a tax refund, minus any taxes owed, when they file in 2022. Families will also be able to change their status as their economic or family situation changes.
How much is the 2021 Child Tax Credit?
The new system provides a refundable tax credit of $3,000 for children aged from 6 to 17 and $3,600 for children who are under the age of six for the 2021 fiscal year. Congressional Democrats are pushing to make the changes to the credit permanent but for now President Biden has said that he would support extending it through 2025.
Families could receive a payment of $300 per child under 6 and/or $250 per child under 18 per month. The legislation envisioned the payments starting in July and running through December covering half the credit. The remainder, $1,800/$1,500 per child, would be available to families as a rebate credit when they file their 2021 tax return in 2022.
Families with older children could benefit from a $500 tax credit. Dependents that are 18 years old and those between the age of 19 and 24 who attend college full time will qualify.
Who is eligible for the enhanced Child Tax Credit?
With the new changes for the 2021 fiscal year all families who have Social Security Numbers and are under the income eligibility threshold, regardless of whether they have income, will have access to the federal checks and the remainder of refundable credit when they file their 2021 income tax returns in 2022. This will allow those on unemployment to access the credit as well with the earnings floor removed.
Individuals will qualify for the enhanced Child Tax Credit if their annual earnings are below $75,000; or a joint income of up to $150,000 for married couples. If your earnings are above those limits, you will receive a reduced credit which gradually phases out and end for individuals earning $95,000 and married couples earning $170,000 filing jointly.