The IRS is set to begin advanced payments of the enhanced child tax credit (CTC) on July 15, and 88% of families with children in the U.S. will get the benefit automatically, the agency recently announced.
The enhanced credit, a component of President Joe Biden's American Rescue Plan (ARP), increases the existing tax benefit eligible families can receive from $2,000 up to $3,000 for kids between the ages of 6 and 17, and up to $3,600 for kids under 6.
The Biden administration says these credits and other parts of the ARP will help lift more than 5 million children out of poverty this year, reducing child poverty by half.
The IRS is paying out 50% of these credits to qualifying families in advance, starting July 15. While many details have yet to be announced, here's what the IRS has said about the credits so far.
Who qualifies for the child tax credit?
Almost 90% of families with children in the U.S. qualify for the monthly payment, according to the IRS. That's approximately 39 million qualifying households with more than 65 million kids. Filers with adjusted gross incomes below the following levels will qualify for the full monthly payment:
- $75,000 for individual taxpayers
- $112,500 for heads of household
- $150,000 for married taxpayers filing jointly, and widows/widowers
The payments will be reduced by five cents for each dollar above those income thresholds. It is also worth noting that progressive Democrats introduced a bill last week to start the income phase out at $150,000 for heads of household, rather than $112,500.
A tax credit means qualifying families will see their tax bill reduced on a dollar-for-dollar basis. Because this is a refundable credit, qualifying taxpayers will receive a payment even if they don't have any earned income or earn too little typically to owe taxes.
How much are the payments worth?
The benefit is worth up to $300 per month for each qualifying dependent child under age 6 on December 31, 2021, and up to $250 for each child between the ages of 6 and 17 on December 31, 2021.
That means a family will receive a maximum of $3,600 for each kid under 6 for tax year 2021, and a maximum of $3,000 for older kids. An eligible family with a 3-year-old, a 6-year-old and a 17-year-old will receive an extra $800 each month from July through December, and another lump sum next tax season.
When will the first payment be made?
The IRS has the first payment scheduled for July 15. Subsequent payments will be made on the 15th of each month in 2021 (unless the 15th falls on the weekend or is a holiday). That means taxpayers will receive a maximum of $1,500 to $1,800 per qualifying child through the end of the year.
What about payments for the first six months of the year?
Technically, these are "advanced" payments, as it is not the 2021 tax filing season yet. But the federal government doesn't want taxpayers still struggling financially from the Covid-19 pandemic to wait another year to receive some of the money. The payments will be estimated based on each taxpayers' 2020 tax returns (or 2019 returns if they have not filed 2020 yet).
Taxpayers will receive payments for January through June 2021 when they file their returns in 2022.
Those who are overpaid or underpaid this year based on their last tax return will correct their payments when they file their 2021 return next year.
Will the tax credit be extended past 2021?
Currently, the enhanced tax credit expires after December 2021. But Biden's American Families Plan seeks to extend it for four more years, through 2025.
"While the American Rescue Plan provides for this vital tax relief to hard working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come," Biden said in a statement this week.
Democrats in both houses of Congress, however, say that is not long enough. Rep. Richard Neal, D-Mass., chairman of the House Ways and Means Committee, introduced new legislation at the end of April that would make the enhanced credit permanent.
What action do families need to take to receive the payment?
Most families won't have to do anything. Similar to the stimulus payments, the CTC payments will be automatically direct deposited into taxpayer bank accounts, or sent in the form of a prepaid debit card or paper check, depending on what information the IRS has on file for each qualifying taxpayer.
But non-filers will need to take action. Even those who made too little to file a 2020 tax return should do so now in order to receive the advanced monthly CTC payments. The Treasury Department and the IRS say they will continue efforts to make more families aware of their eligibility.
The IRS also notes that people will be able to opt out of the advanced payments if they want to. They will also be able to make updates if their income, filing status or number of qualifying children changes. The IRS is setting up online portals for taxpayers to make these changes; it is not yet available, but updates are expected before July 15.
Sign up now: Get smarter about your money and career with our weekly newsletter
"payment" - Google News
May 21, 2021 at 08:40PM
https://ift.tt/3f5EYhi
Payments for the new $3,000 child tax credit start July 15. Here's what to know - CNBC
"payment" - Google News
https://ift.tt/3bV4HFe
https://ift.tt/2VYfp89
Bagikan Berita Ini
0 Response to "Payments for the new $3,000 child tax credit start July 15. Here's what to know - CNBC"
Post a Comment