Is a $3600 stimulus check coming?
When it comes to President Joe Biden's American Rescue Plan, one of the most common questions we are asked is surrounding the likelihood of a new payment.
President Joe Biden's American Rescue Plan passed through Congress back in March and, along with a rapid rollout of the covid-19 vaccines across the country, it has served to bring some financial relief to American families feeling the pressure of the effects of the pandemic.
**Breaking news on stimulus package and all the latest information**
As part of that relief package, a further round of stimulus checks was signed off - with a value of up to $1,400 for eligible individuals - and within two months there has been around 386 billion dollars worth issued out. These checks, predominantly and speedily sent via direct deposits, followed on the back of those of the same value from the CARES Act about a year previous, and the $600 checks issued in the final days of Donald Trump's administration.
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Likely due to all the various payment values being sent, along with numeous other benefits in the package, and a variety of eligibility criteria to get your head clear about, many questions are still being asked about a potential stimulus check for $3,600. Allow us to clarify.
$3,600 payment | stimulus check vs child tax credit
As well as the aforementioned stimulus check, the $1.9 trillion covid-19 relief bill that had Biden's signature penned over it also included an enhanced Child Tax Credit that was to be sent along with parents' monthly direct beenfits for each child 17 and younger they claim for tax purposes. This credit was up to the value of the regularly cited value of $3,600, although we explain below how this is calculated and who is eligible.
On 5 May, the IRS restated their intention to begin sending payments related to the enhanced child tax credit this summer, posting on the IRS website that "Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year."
$3,600 Child Tax Credit: how payments are 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.
Families who do not normally submit a tax return are encouraged to do so this year, to ensure the information the IRS has on hand is up to date. The IRS has urged families with children to "file their 2020 tax returns as soon as possible to make sure they're eligible for the appropriate amount of the CTC as well as any other tax credits they're eligible for, including the Earned Income Tax Credit (EITC)." The tax authority is also promoting use the use of electronically filing and direct deposit which "can speed refunds and future advance CTC payments."
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.
$3,000/$3,600 Child Tax Credit to benefit 66 million
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. During President Biden's first joint address to Congress, he unveiled his third major legislative proposal of the year, called the American Families Plan which extends the enhanced child tax credit through 2025.
In releasing the proposal, the White House touted that the "expanded Child Tax Credit in the American Rescue Plan benefited nearly 66 million children, and it was the single largest contributor to the plan’s historic reductions in child poverty."
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.
Enhanced Child Tax Credit: who is eligible?
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. The enhanced child tax credit also includes 17-year-olds, who before were not eligible to claim as dependents.
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.