Millions of Americans Are About to Get $3,600 in New Stimulus — Are You One of Them?
While a fourth stimulus check might not be in the cards, a new $3,600 benefit for millions of Americans will now be on its way come July.
New direct monthly payments will be disbursed as part of an expanded child tax credit of up to $3,600 per child for working families, essentially creating a “fourth” stimulus check. Under the American Rescue Plan Act of 2021, the child tax credit has been increased to $3,600 per child under the age of 6 and $3,000 per child for ages 6-17. Previously, this credit only applied to children under 17. According to the National Law Review, the credit is fully refundable, and the $2,500 earned-income requirement is eliminated.
Taxpayers will receive half of this credit in monthly cash payments. This means that for the months of July through December 2021, recipients will receive $250 to $300 a month for each qualifying child. Taxpayers will claim the remaining half of the credit next year, on their 2021 tax returns.
Taxpayers earning under $75,000 per year — $150,000 for married joint filers and $112,500 for heads of household — are eligible for the full credit. The credit will be reduced by $50 for each $1,000 in income above those thresholds.
It’s important that you check your filing data with the IRS. Advanced payments are based on an IRS estimate from data like income, marital status and number and age of qualifying kids. Should that data be outdated, it could trigger an overpayment of the tax credit, which could require you to pay back any excess funds.
The IRS will set up an online portal to help parents inform the IRS of any changes on July 1st.
Child Tax Credit Payment– Here’s When You’ll Get Your Money
The rollout of funds for the expanded child tax credit is expected to start July 15, and the IRS has already started sending out letters to 36 million families it believes are eligible to receive them.
According to the IRS, the letters are informing families, who based on tax returns filed with the agency, are believed to qualify for the credit.
Letters are going to families who may be eligible based on information included in either their 2019 or 2020 federal income tax return. Letters will also be going out to those who used the Non-Filers tool on irs.gov last year to register for a stimulus payment, as the tax credit is available to those who qualify who do not normally file taxes.
The IRS stated that families who are eligible for the CTC will also receive a second personalized letter listing an estimated amount of each of their monthly payments. Most families will not need to take any additional action to receive their payments. That said, if you believe you should qualify but do not receive a letter in the coming weeks, the IRS is also setting up 2 different online portals for you to register and check existing information. If you filed your taxes with outdated information, this could be a reason why you might not receive a CTC come July, so it is best to make sure your income and number of dependents specifically are updated.
Eligible families will begin to receive payments on July 15. From then the schedule of payments will be as follows:
- August 13
- September 15
- October 15
- November 15
- December 15
The payments will be paid via direct deposit or check. Each payment will be up to $300 for each qualifying child under the age of 6, and up to $250 for each qualifying child from ages 6-17. Other amounts and phaseout income thresholds are also available for families with children 18 and above who attend college, and for couples who make above the full income amount threshold.
Here is who will be eligible:
- Single Filer – Adjusted gross income of $75,000 or less for full amount. This phases out by $50 for $1,000 of income over $75,000 fully phased out by $240,000.
- Head of Household Filer – Adjusted gross income of $112,500 or less for full amount. Begins phasing out above threshold and fully phases out at $240,000.
- Couple filing jointly – Adjusted gross income of $150,000 or less for full amount. Begins phasing out above the threshold and fully phases out at $440,000.
This means that couples filing jointly that make under $440,000 a year will receive at least some form of payment.
Another detail to consider includes information for divorced parents. The child you are claiming as a dependent for the credit must live with you for at least six months out of the year in order for you to receive the credit. Parents who share custody cannot both receive the credit.
In addition, any child being claimed as a dependent must have a social security number and, for married couples filing jointly, at least one spouse needs to have a social security number or an individual taxpayer identification number.
You May Want to Opt-Out of Monthly Child Tax Credit Payments
Reasons that parents might want to opt-out of monthly payments include if you’d rather have one large payment next year, if you know your circumstances will change and don’t want to deal with updating your information in the IRS portal, or if you’re concerned the IRS might accidentally send you an overpayment and you don’t want to worry about paying that money back.
However, Americans who opt-out of receiving monthly child tax credits from July through December, won’t get a full payment — or any payment at all — until after the IRS processes the 2021 tax return next year.
Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children on the IRS Web Portal.
How to Avoid Paying Back the Child Tax Credit
There are a few circumstances that could have you paying the child tax credit benefit back. These payments are an advance based on the taxes of your current income.
This means that if next year your salary increases, you might have to pay the credit back. This is because the child tax credit is given based on information from 2020’s tax return (or your 2019 return if you didn’t file in 2020). If your tax return for the year 2021 though states a change in salary, it could be possible that you were receiving money that you were no longer eligible for and might be asked to pay it back.
To avoid this, updated information is the most crucial element to avoid paying back the benefit.
If you haven’t updated your information with the IRS yet, the IRS has two specific online portals for parents to report information for child tax credit eligibility (the portals should be live on July 1 at www.IRS.gov). Updating the information will be one of the most critical steps in ensuring you will not have to pay the credit back.
Payments will not be given until taxpayers have had a chance to update information or opt-out via the portal. If you do not have internet access, you will be able to do so at an IRS office or by mail.
Another way to avoid having to pay back the credit, at least partially, is a protection for lower earners. According to the Congressional Research Service, $2,000 per child will be “shielded” from repayment if the error is due to net changes in the number of qualifying children. For example, one of your children just had a birthday that surpasses the eligibility age, but you already received a payment. Any amount of benefit you received under $2,000 would not need to be paid back.
Reporting income and number of children will not force you to pay more taxes before you get the credits, but will serve to give the most accurate benefit amount without you having to pay back the money later.
More information will be posted on the Advance Child Tax Credit Payments site at www.IRS.gov.