You may have heard about the possibility of a tax credit coming your way in the form of a check. Or, you might have suddenly noticed some extra money in your bank account. Perhaps you heard a rumor that there are more checks to come. But what is this money, why are you getting it, and will you be expected to pay it back?
First, a little background.
According to recent studies, nearly 15 million children –or 20 percent– live in poverty in the US, according to the Children’s Defense Fund and other organizations that track such data. The existing US Child Tax credit is tied to income, a predicament in which many families literally do not make enough money to qualify for the credit. With the economic devastation caused by the COVID-19 pandemic, this situation became even more dire. Therefore, lawmakers have temporarily expanded the Child Tax Credit for 2021, with the goal of reducing child poverty by nearly half.
The American Rescue Plan increases the Child Tax Credit (CTC) to $3,600 per year per child for children ages 0-5, and $3,000 annually for children ages 6-17 until the end of 2021.
The payments began on or around July 15, 2021 and will continue monthly, either through the mail or by direct deposit, until December 2021. The remaining CTC benefit will be distributed in 2022, when families file their 2021 taxes.
It is estimated that 90 percent of children in the country will automatically get the new CTC. Married couples making $150,000 per year or less are eligible for the full CTC benefit, with the benefit phasing out as family income increases above that threshold. Most families do not have to take any additional action to receive the payments, as the IRS distributes the payments using information it already has on file from 2020 or 2019 income tax filings.
For families who make under $24,800 per year, and therefore don’t file taxes, there is a new IRS non-filer portal that can be used to claim the CTC. Additionally, the IRS is opening a second “Change of Circumstances” portal. This is where families can report changes to their household, such as significant income changes, or changes in marital status or to the number of qualifying children. This can also be used for updating bank account information.
What if I don’t want to receive this money now?
The “Change of Circumstances” portal mentioned above can be used to opt out of monthly payments for families who prefer to get their tax credit as a lump sum when filing their annual tax return.
Will this affect my eligibility for other programs?
Receiving the expanded CTC will NOT change a family’s eligibility for programs like the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), or Medicaid.
When does this money run out?
The expanded CTC is only available through 2021, although some lawmakers are pushing to extend this benefit beyond this year.
More information and links can be found on the IRS website here.