Child Tax Credit: How To Know If You’re Eligible, How Much You’re Paid Out
Biden increased child tax credits as part of his American rescue plan. Here’s how much you will get and when you will receive the payments.
Just the FAQs, USA TODAY
When the American bailout plan went into effect in mid-March, it did much more than just send business stimulus checks to people’s bank accounts. It has also increased a substantial tax credit, setting the stage for millions of families to receive a financial boost.
Previously, the child tax credit was worth no more than $ 2,000, of which only $ 1,400 was refunded. That means if a family took out the $ 2,000 loan for a single child and owed no money to the IRS, the family could repay no more than $ 1,400.
For the current tax year, however, the child tax credit is fully refundable and also worth a lot more money.
- The balance increases to $ 3,600 for children under 6 years of age.
- For kids ages 6-17, it will be worth $ 3,000.
- Children aged 18 and under and full-time students aged 19 to 24 receive their families $ 500 each, while the old child tax credit does not apply to children over 16.
Originally, the IRS had said that a tax return was required in order to be eligible for the Extended Child Tax Credit. But now it makes this loan available to families who are not going to file a declaration.
A new portal will soon open
Not everyone has to file a tax return. In fact, low earners are often exempt from tax because their wages are lower than the standard withholding (the standard withholding is part of income that is tax-free).
The problem with not filing a tax return, of course, is missing out on tax credits. But now the IRS will allow non-applicants to take advantage of the Extended Child Tax Credit. A portal is planned to be launched in June that will allow non-applicants to enter their information in order to claim this credit.
IRS letters: IRS sends out letters about the new child tax credit
When does the payment start: Families will receive monthly prepayments starting July 15th
If this concept sounds familiar, it is because the IRS has already done it. Back when it was issuing stimulus checks, it gave non-applicants the option to register for a payment by also entering their information into a portal.
Although low earners often have the right to file a free tax return, many do not take this step because they are overwhelmed by the process. Opening up child tax credit to non-applicants is an important move by the IRS as it could lead to many more families getting the money they are entitled to.
The IRS will be issuing monthly checks for child tax credit as early as July. These checks are made out for six months and represent half of the total amount families are entitled to under the loan. The remaining half will be claimed as a refund on 2021 tax returns filed in 2022.
Although the extended credit is temporary, the Biden government is pushing for the child tax credit to be extended through 2025. This, in turn, could help many families recover from the pandemic and get a more solid financial footing.
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