The IRS is scheduled to begin issuing the advanced child tax credit this week, which will provide up to $300 per kid per month to millions of American families.
According to reports, the tax credit, which would cover almost 88 percent of children in the United States, will be available to more than 30 million families starting this month.
The first of six monthly payments is scheduled to be distributed starting on July 15.
Because the payments are based on the most recent tax returns, most parents will not need to take any further procedures to get the benefit.
The payments will be increased in twelve monthly increments as part of President Joe Biden’s $1.89 trillion American Rescue Plan, which was enacted into law earlier this year.
Here’s everything you need to know before the first round of payments.
What is the amount of the payments?
According to the IRS, qualifying families will get up to $300 per month for each kid under the age of six, and $250 per month for each child between the ages of six and seventeen.
For the last six months of 2021, the maximum is $1,800 for each kid under the age of six, and $1,500 for those aged six to seventeen. Previously, families could receive a maximum of $2,000 per kid each year, and only those with income tax responsibilities were eligible.
The advantage is now extended to 17-year-olds as well.
According to the federal tax office, the other half of the tax credit may be claimed next year when taxpayers submit their 2021 tax returns.
Who qualifies for the payments?
Parents who receive payments must live in the United States for more than half of the year, have at least one child under the age of 18 at the end of the year, have a valid Social Security number, and satisfy certain income criteria.
Taxpayers who satisfy the following updated adjusted gross income thresholds will get the entire amount:
$75,000 or less for single parents.
$112,500 or less for heads of families.
$150,000 for married couples filing jointly and eligible widows or widowers.
Those with higher incomes are still eligible for the child tax credits, but their amounts will be reduced based on their earnings recorded on their 2020 federal income tax return or if it hasn’t been filed yet their 2019 return.
Those earning more than the stated amounts will have their benefits cut to $2,000 per kid until their modified adjusted gross income reaches $400,000 for married couples filing jointly and $200,000 for all other filing statuses.
Still not sure whether you’re eligible? The IRS provides an online tool for this purpose.
Anyone who does not usually file taxes but is eligible for the credit may still get it by signing up for payments via the IRS’s non-filers service. That is the same procedure utilized by non-filers to obtain stimulus payments from the three federal COVID-19 assistance programs.
When are the payments going to be made?
In addition to the July 15 payment, the IRS plans to send the remaining monthly checks for this year on August 13, September 15, October 15, November 15, and December 15.
Depending on the information on file with the IRS, parents will receive the payment by mail or direct deposit into their bank account.
Anyone who wishes to get their check through direct deposit but has not yet supplied the IRS with their account information may do so on the IRS’s website.
Is it possible to get the tax credit in a lump amount instead?
Yes, but the registration deadline for that option has already expired.
In the future, however, qualified families may opt-out of the monthly payments by 11:59 p.m. ET three days before the first Thursday of the next month, according to the IRS.
This implies that taxpayers may still opt out of some of the payments if they do so by the deadlines listed below:
August: August 2nd, September: August 30th, October: October 31st, November: November 1st, and December: November 29th.
In addition to selecting that option to receive the remaining payments at the end of the year, families may choose to unenroll if they expect the amount of tax owed to be higher than your anticipated refund when you file your 2021 tax return, according to the IRS.
Because the payments are being sent in advance, the government agency said that every dollar you receive will decrease the amount of Child Tax Credit you will claim on your 2021 tax return.
Are these credits in any way taxable?
No. According to tax authorities, the contributions are not considered income and will not be recorded as such on the following year’s return.
Get more information
On its website, the IRS provides a comprehensive guide with tools to assist families to understand the new child tax credits, including all relevant documents published by the agency.