(CBS Miami) – The updated child tax credit will begin in just a few weeks. On July 15, the Internal Revenue Service (IRS) will pay millions of parents up to $ 300 per child. Monthly payments will run through the end of 2021 and in total could be more than any previous stimulus checks. The credit could continue beyond this year, if the draft US plan for families passes into its current form. But who is entitled to the payments and how can we be sure that the money is coming?
Who is eligible for a monthly payment?
For parents of children up to age five, the IRS will pay $ 3,600 per child, half of the six monthly payments and half of the 2021 tax credit. This rises to $ 3,000 in total for each child between the ages of six and 17. The IRS will make a one-time payment of $ 500 for dependents age 18 or full-time students up to age 24.
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Payments will be based on the Modified Adjusted Gross Income (AGI) reflected on the 2020 income tax return of one or more parents. (AGI is the sum of salary, interest, dividends, alimony, retirement distributions, and other sources of income minus some deductions, such as interest on student loans, child support payments and pension contributions.) The amount gradually decreases at a rate of $ 50 for every $ 1,000 of annual income over $ 75,000 for an individual and over $ 150,000 for a married couple. The benefit will be fully refundable, which means it will not depend on the recipient’s current tax burden. Eligible families will receive the full amount regardless of what they owe in taxes. There is no limit to the number of dependents that can be claimed.
The expansion of the child tax credit:
⬆️Increase the amount of credit
✅ Makes the credit fully refundable
↔️ Splits part of the payment into monthly installments instead of a single annual lump sum
Help Halve Child Poverty
Investing in the well-being of our children https://t.co/VP2KKusvIX
– Treasury Department (@USTreasury) May 17, 2021
As an example, suppose a married couple have a four-year-old and an eight-year-old and have a joint annual income of $ 120,000 on their 2020 taxes. The IRS would send them a monthly check for 550. $ from July. That’s $ 300 per month ($ 3,600 / 12) for the youngest child and $ 250 per month ($ 3,000 / 12) for the older child. These checks would last until December. The couple would then receive the balance of $ 3,300 – $ 1,800 ($ 300 X 6) for the youngest child and $ 1,500 ($ 250 X 6) for the older child – as part of their repayment of 2021 tax.
Parents of a child outside an age bracket will receive the lower amount. This means that if a five-year-old turns six in 2021, parents will receive a total credit of $ 3,000 for the year, not $ 3,600. Likewise, if a 17-year-old turns 18 in 2021, parents will receive $ 500, not $ 3,000.
An increase in income in 2021 to an amount above the threshold of $ 75,000 ($ 150,000) could reduce a household’s child tax credit. The IRS has confirmed that it will soon allow applicants to adjust their income and custody information online, reducing their payments. Failure to do so could increase your tax bill or reduce your tax refund once the 2021 taxes are filed.
Eligibility requires that the dependent be part of the household for at least half of the year and be at least half supported by the taxpayer. A taxpayer who earns more than $ 95,000 ($ 170,000) – where the income limits gradually disappear – will not be eligible for the expanded credit. But they can still claim the existing credit of $ 2,000 per child.
READ MORE: Child tax credit: what will the revised credit mean for families?
Families likely to be eligible received a letter of qualification in the first half of June. He said, in part, “If you are eligible for advance payments from the CTC and want to receive those payments, you don’t have to do anything.” You will receive a letter with more details.
The second letter estimating the amount is pending.
Families eligible to receive monthly # Child tax credit payments will receive a second personalized letter with an estimate of their monthly payment, which begins July 15. Learn more about #IRS at: https://t.co/AsJCmx1Xnc pic.twitter.com/Zdoz5F8VA3
– IRSnews (@IRSnews) June 16, 2021
How to make sure you receive a monthly payment
If a parent has filed taxes for 2019 and / or 2020 and meets the conditions outlined above, nothing more needs to be done. The IRS has the information it needs. They will automatically start issuing payments in the near future.
If a parent is unsure whether they qualify, they can consult the recently launched Child Tax Credit Eligibility Wizard. The tool will walk a taxpayer through a series of questions to determine if they meet the basic requirements. It is necessary to have your tax return handy or, failing that, some basic information on income and eligible children.
Many eligible parents do not file taxes. For this reason, the IRS has also implemented the Non-Filer Registration Tool for the Child Tax Credit. The portal allows parents who do not usually declare taxes to provide basic information about themselves. This information includes their name, address, email address, date of birth and social security number. The IRS will then use the information provided to verify eligibility and automatically begin issuing monthly payments.
The IRS also recently launched the Child Tax Credit Update Portal. This tool allows a potential beneficiary to verify their eligibility, see if they are eligible for advance payments, and opt out of monthly payments. Opting out of monthly payments means the taxpayer will receive the full credit when they file their 2021 taxes.
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First published Thursday, June 24, 2021 at 6:21 p.m. ET.