Advanced child tax credit payments – Here’s what to know
Since Covid-19 was declared a pandemic on March 11, 2020, by the World Health Organization, the United States government has made efforts to help individuals and businesses. On July 15, the IRS will start sending out the advanced payments of the child tax credit from the American Rescue Plan to eligible families. The Advanced Child Tax Credit payments will be estimated from their already filed 2020 tax return. According to the IRS, roughly 39 million households covering 88% of children in the United States will receive the payments.
What is the Expanded Child Tax Credit?
The expanded child tax credit is a modification of the regular child tax credit with these specific changes:
- It is now available for 17-year-old dependents
- The maximum amount increases to $3,600 for each kid under the age of 6 and a maximum of $3,000 for older kids
- It is fully refundable
- Families can receive up to half of it in advance during the last half of 2021.
What is the amount of the advanced child tax credit payment?
On May 17, 2021, the IRS and the U.S. Department of the Treasury announced that payments begin on July 15, 2021. Eligible families will receive payments of:
- up to $300 per month for each child under the age of 6 and
- up to $250 per month for each child between the age of 6 and 17.
The processing of these payments will fall on the 15th of each month until the last month of 2021. The 15th will change if it falls on the weekend or is a holiday. In this case, you will receive your payment the next business day.
These payments represent half of the total amount, taxpayers will receive the remaining balance when filling their 2021 tax return.
There is the possibility of overpayment or underpayment. Taxpayers will need to correct their payments when they file their 2021 tax returns.
Who qualifies for the child tax credit?
Taxpayers with adjusted gross income below the following levels will qualify for the total monthly payment:
$75,000 for individual taxpayers
$112,500 for heads of household
$150,000 for married taxpayers filing jointly, widows, and widowers
Above these AGIs, the extra amount above the original $2,000 credit is reduced by $50 for every $1,000 in modified AGI.
How to ensure you receive your Advanced Child Tax Credit payments?
Households eligible for the Child Tax Credit payments will automatically receive their monthly payments through direct deposit, paper check, or debit cards. Most taxpayers will not be required to take any action to receive their payments. All families need to know that Child Tax Credit payments are sent based on what information the IRS has on file for each qualifying taxpayer. The IRS continues its efforts to make more families aware of their eligibility and take appropriate actions.
If you did not file a return, you need to contact a tax professional to help you take steps to receive the advanced monthly Child Tax credit payments. You can also visit the Child Tax Credit update portal for more information.