The White House recently announced that qualifying American families with children will begin receiving direct cash payments in July under a new child benefit created by the American Rescue Plan.
The recent legislation, designed to help low- and middle-income families, increased the maximum annual credit from $2,000 per child (under 17) in 2020 to $3,000 per child (under 18) or $3,600 (children younger than 6) for 2021. While the 2020 credit was partially refundable, the 2021 credit is fully refundable. In addition, half of the 2021 annual child tax credit will be distributed to eligible taxpayers in advance payments from July to December 2021.
What you need to know:
- The Internal Revenue Service will start delivering a monthly payment directly to qualifying families’ accounts on July15.
- As with the stimulus checks sent out by the IRS earlier this year and last year, most people will receive the monthly child tax credit payments by direct deposit.
- The monthly amounts will be $300 per child under 6 and $250 per child older than 6 for those who qualify.
- The monthly benefits will be deposited directly in most families’ bank accounts on the 15th of every month — or the closest day to that date, if the 15th falls on a holiday or weekend — for the rest of the year, without any action required by families.
- Income qualifications — The credit diminishes for individuals with adjusted gross income of more than $75,000, as well as couples earning more than $150,000.
- Payments will be made every month from July to December.
- So far, the monthly payments are only scheduled to continue through 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.
- If families prefer to receive a bulk payment in 2022 after they file their 2021 taxes, they will have the opportunity to opt out through an IRS information portal that is still in development.
- For those who haven’t filed 2020 taxes, the IRS will use 2019 returns.
- If you have not been required to file taxes due to your income being only from SSI or Disability, you will need to ensure that the IRS has your account. You have two options:
- the IRS is working to make a portal available for non-filers to submit their information and receive the credit. You can use this portal when it becomes available, or
- you can late-file your 2020 income taxes now.
For more information, go to this resource.