The first installment of the Internal Revenue Service's (IRS) child tax credit payments were distributed on July 15, kickstarting a six-month plan that will provide families in need across America with hundreds of dollars in extra cash as an advance on their 2021 tax return.
As part of President Joe Biden's American Rescue Plan, signed earlier this year to help struggling citizens amid the coronavirus pandemic, half of the credit will be available through December 2021 via the monthly payments, while the other half will be added to families' 2021 tax refund.
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Who qualifies for the tax credit?
The income-based, fully refundable credit applies to citizens as well as noncitizen parents with individual taxpayer identification numbers (ITIN), but children must have Social Security numbers. The Biden administration hopes it will reduce the amount of child poverty, as it will make more low-income parents eligible to receive the full amount of the credit.
The full amount of the child tax credit will be available for single-parent heads of households earning $112,500 or less, individuals earning $75,000 or less and married filers earning up to $150,000 per year. After these caps, the amount families will receive begins to phase out based on their income. It's removed completely for single parents earning more than $200,000 or for married couples filing a joint return of more than $400,000.
Currently, families can check the IRS website to see if they are eligible, unenroll from payments and see a list of their payments. They can also now make changes to their bank account information. The payments will be made through direct deposit, paper checks or debit cards on the 15th of each month unless that day falls on a weekend or holiday.
How much can families expect to receive?
According to the IRS, qualifying children under the age of six are eligible for a credit of $3,600, and children ages six to 17 are eligible for $3,000. The monthly installments for those qualifying children will be made in payments of $300 and $250, respectively.
Parents can see if they are enrolled for advanced payments, unenroll from advance child tax credit payments or provide or update their bank account using the IRS’ Child Tax Credit Update Portal. Any changes made now will take effect starting with the August payment.
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What can you do if you don't qualify?
The tax credit will only be available for one year, but key Democrats have already begun calling upon the Biden administration to extend the child tax credit or even make it permanent. The administration is reportedly seeking to extend the credit through 2025.
Parents don’t need to do anything to begin receiving their child tax credit, but they may need to update their information if they have moved, changed bank accounts or had a baby during 2021 that wouldn’t have been included in the 2020 tax return. Beginning in early August, parents will be able to make changes to their mailing address, and later this summer they will be able to make changes to their dependents, marital status and income, and also re-enroll if they had previously unenrolled.
Families also shouldn’t fret if they miss payments due to not being able to change their information. Any part of the tax credit not already paid out when they file taxes at the beginning of 2022 will be reimbursed at that time.
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