The Internal Revenue Service (IRS) stated Monday that it will start distributing millions of letters informing families about the money heading their way. The distribution will occur approximately a month ahead of the first repayments under the enhanced Child Tax Credit.
The first round of letters will advise recipients that they could be eligible for the funds. According to the IRS, about 36 million families have already received these letters.
The second series of letters will detail how much money users will get monthly as a result of the increased tax credit. Every child under the age of six in a qualified home is entitled to a $300 monthly payment. A $250 grant per child is available to households with children aged 6 to 17.
When will people start receiving Child Tax Credit?
The payments will begin on July 15 and continue through December, scheduled in the middle of the month, MarketWatch reported.
The IRS stated that payments will be made on the 15th of each month, except in August, when payments would be made on the 13th. The 15th of August is a Sunday. The increased benefits are part of the $1.9 trillion American Rescue Plan, which was approved in March.
For children under the age of six, lawmakers boosted the maximum compensation for a year from $2,000 to $3,600. They also boosted the rewards to $3,000 for children beyond that age. The next payments are half of those quantities in advance.
Under the increased credits, single families with a modified adjusted gross income of under $75,000 can receive full payments per child. Married couples filing jointly obtain $150,000 while those filing as the head of household can get $112,500.
According to Treasury Department calculations, the funds will reach 88 percent of American households, with around 65.25 million children.
If a family prefers to receive the funds in one lump sum rather than in monthly installments, they will be able to do so via an online site. Although the site has yet to be launched, the IRS has stated that additional information will be provided in the coming weeks. Another upcoming web gateway will allow taxpayers to notify the IRS of significant life events, such as the birth of a child.
IRS Commissioner Charles Rettig has stated that the IRS needs a tax return to determine how much each payment should be and where it should be sent. "The IRS encourages individuals and families who haven't yet filed their 2020 return to do so as soon as possible so they may get any advance payments they are entitled to," the agency stated on Monday.
Tax Day was on May 17, but with an extension, 2020 taxes may still be submitted until October 15. There is no penalty for failing to file for taxpayers who do not owe taxes, and they have a three-year window to submit and get their refund, according to the IRS.
Child Tax Credit requirements
Per CNET, if your children are under the age of six, you can claim up to $3,600 per child if you fulfill the income requirements. This is $1,600 more than the $2,000 parents might claim on their 2020 tax returns.
Children born later in 2021 are included. Parents will be able to update the IRS with their updated dependent information via an online portal by the end of next month to get advance payments this year. Otherwise, parents will be able to claim on their 2021 tax return the following year. Additional requirements include:
- The child you're claiming must spend at least six months of the year with you.
- Unlike mixed-status families, you and your child must be US citizens.
- At least one spouse must have a Social Security number or an ITIN if they are filing jointly.
- The child must also have a Social Security number; if the child simply has an ATIN, he or she will not be eligible. Adopted children are included.
- The tax credit is not available to parents who share custody of a kid.
How much will families receive per child?
If a taxpayer's 2020 tax return has not been submitted and processed yet, the IRS will use 2019 tax returns to evaluate eligibility. To be qualified, a taxpayer must spend more than half of the year in the United States. There is no need to do anything further to sign up for the program other than file a 2020 tax return. The IRS will determine a taxpayer's eligibility, as per AS.com.
The IRS advises people with children to submit a 2020 tax return as soon as possible if they have not already done so to receive the right tax credit amount. This covers those who have no income but are not obligated to submit taxes and are therefore eligible for the credit. The agency also suggests that people use direct deposit to get their refunds and advance payments sooner.
At the end of 2021, eligible families can receive up to $3,000 per kid aged 6 to 17. By the end of 2021, any child under the age of six might be eligible for up to $3,600. Because the credit is completely refundable, if a family owes less than the credit amount, the difference will be refunded to them as a tax return.
For 18-year-old dependents and dependents between the ages of 19 and 24 who are attending college full-time, taxpayers can still claim a nonrefundable credit of up to $500 toward the child tax credit under the American Rescue Plan. On this credit, there will be no upfront payment.