The first installments of the child tax credit are paid this week. What there is to know

Olivier Rossi | Stone | Getty Images

It’s an exciting week for millions of children and their families across the United States.

On July 15, the first payment of the new expanded child tax credit will be sent to some 39 million families with approximately 65 million children, according to the IRS.

Even though there have been months of preparation for families to learn about credit, there is still confusion about it, according to a recent survey by Ally Bank. Nearly half of those polled were unsure whether they qualified and a quarter did not know how to access credit, according to the report.

“If you’re a parent, my advice is to take a moment now and see if you’re eligible, and if so check how much of a child tax credit payment you might receive.” , said Anand Talwar, Deposits and Consumer Strategy. framework for Ally Bank, in an email. “This way you can plan and plan well. “

What is the enhanced child tax credit?

The enhanced tax credit was introduced in March, when President Joe Biden signed the American Rescue Plan. For 2021, the maximum credit is $ 3,600 for children under 6 and $ 3,000 for children 6 to 17.

Half of the credit will be distributed as an advance on 2021 taxes in six monthly installments. For households receiving the full benefit, these payments will be $ 300 per month for children under 6 and $ 250 for those aged 6 to 17.

There is no limit to the number of children who can receive the credit per family.

More Investing in you:
Some families may want to opt out of child tax credit payments
This researcher hopes to change Biden’s mind on canceling student loan
As travel demand grows and prices rise, 7 tips to save this summer

Who is eligible for the maximum credit?

Most American families are entitled to a certain amount of money.

Full credit is available married couples with children who file taxes jointly and whose adjusted gross income is less than $ 150,000, or $ 75,000 for individuals. The credit gradually disappears for taxpayers who earn more money and stops for people earning $ 95,000 and married couples earning $ 170,000 who jointly file.

Taxpayers who earn more than this will still be eligible for the regular child tax credit, which is $ 2,000 per child under 17 for families earning less than $ 200,000 per year, or $ 400,000 for married couples.

What do I have to do?

Most families who have filed their taxes have nothing to do. The IRS will use the 2020 tax returns to determine eligibility, or the 2019 returns for those who have not yet filed a return for last year.

Additionally, non-filers who used the IRS Non-Filer Tool in 2020 to enroll family members eligible for stimulus payments will automatically be enrolled in the Child Tax Credit.

In June, the agency sent some 36 million letters to families who may be eligible for credit and monthly payments. Later that month, he sent out another letter stating how much money families should receive. The agency also has a website eligibility tool which is available in English and Spanish where families can check if they are eligible for the credit.

Some families will need to take extra steps to get the credit or to make sure they get the full amount they are entitled to. Those who do not traditionally file their taxes because they do not have enough income, but have eligible children, can register through the IRS tool for non-file filers.

Families can also check if they are enrolled in direct deposit and see which account the money will go to via the IRS Child Tax Credit Update Portal. They can also sign up for direct deposit or change their bank account through the portal, as well as view payment history.

In August, people will be able to update their mailing address, and at some point, they will be able to review information such as marital status, income, dependents and re-enroll if they had already unenrolled.

How will the payments be sent?

Like the stimulus checks, most monthly child tax credit payments will be sent by direct deposit – 80% of eligible people will receive the money this way, according to the IRS.

If the IRS has the direct deposit information from your tax return, this is likely how you will receive the monthly credit. If you don’t have direct deposit, the IRS will also send paper checks to some families, and in the future may also send debit card payments.

When will future payments be sent?

All deposits will be paid on the 15the of each month, unless the 15the falls on a weekend or public holiday, in which case the money will be sent on the nearest business day. After the first benefit payment on July 15, families can expect subsequent payments on August 13, September 15, October 15, November 15 and December 15, according to the IRS.

So far, monthly payments are only expected to continue until the end of 2021. Families will receive the second half of the credit when they file their 2021 taxes in 2022. But that could change – President Biden and d other lawmakers have suggested making the credit available for additional years, if not permanent.

Can I unsubscribe? What happens if I do this?

Families can choose not to receive monthly credit payments through the Child Tax Credit Update Portal. Those who do will not get the monthly amounts, but will still receive the full credit they are entitled to when they file their 2021 taxes.

Some families may choose this route because they don’t need the monthly payments immediately or prefer to get a lump sum as a tax refund, said Elaine Maag, senior research associate at the Urban-Brookings Tax Policy Center.

“There is some evidence that shows that some people really like getting this big tax refund and can use it as an opportunity to buy a household item like a refrigerator or to build up first and last month’s rent so they can move, ”she said.

Taking out the credit all at once could also offset taxes owed for families who anticipate a tax bill.

It’s too late to unsubscribe for the first monthly payment, but families can always tell the IRS not to send the money in the future. The last day to opt out of the next payment, due in August, is August 2.

To see how much you can expect, personal finance website Grow created a calculator this takes into account your filing status, your annual income and the number of dependents you have.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

*