Update to PSA: Child Tax Credit Payments To Begin July 15 .
Today, families across the country will see the first payments from the Child Tax Credit expansion enacted in the American Rescue Plan – $3,600/year for kids under 6 and $3,000/year for kids over 6.
Unlike the 2017 Trump tax cuts for the wealthy and corporations, these tax cuts go straight into the households of American working families. This will help millions of Americans pay their bills and lift children out of poverty. The expanded child tax credit could “cut poverty in half”.
This pro-family tax cut was passed with only Democratic votes. Not one Republican in Congress voted for this bill. Republicans no doubt will now try to tout the benefits of this program and claim credit for it, and they will be lying. Do not fall for their lies. You have only the Democratic Party to thank for this financial assistance.
CNBC reports, 35.2 million families just got the first monthly child tax credit payment:
It’s a historic day for U.S. families with children.
Roughly $15 billion has been sent to 35.2 million families in the first of six advance child tax credit payments, according to the U.S. Treasury Department and IRS. The average payment in the first round is $423, and will reach nearly 60 million children, the agency said.
“For the first time in our nation’s history, American working families are receiving monthly tax relief payments to help pay for essentials like doctor’s visits, school supplies, and groceries,” said Treasury Secretary Janet Yellen in a statement. “This major middle-class tax relief and step in reducing child poverty is a remarkable economic victory for America — and also a moral one.”
The enhanced child tax credit is one of the largest anti-poverty measures seen in the U.S. since President Lyndon B Johnson’s war on poverty was launched in 1964. It’s also the first time a major tax credit has been sent in advanced payments, and on a monthly basis, according to Treasury senior administration officials.
The enhanced child tax credit
The American Rescue Plan passed in March added to the existing child tax credit. For 2021, the maximum enhanced credit is $3,600 for children younger than age 6 and $3,000 for those between 6 and 17. The regular child tax credit was $2,000 for children under the age of 17.
Half of the money will be distributed as an advance on 2021 tax credits in monthly payments from July to December — the second half will be claimed when families file taxes next year. For households getting the full benefit, payments will be $300 per month for children under the age of 6 and $250 for those between the ages of 6 and 17.
There’s no limit on the number of eligible children who can receive the credit. For example, a family with three children ages 5, 8 and 10 who qualified for the full credit would get $800 per month.
The full credit is available to eligible households with adjusted gross income less than $150,000 for married couples filing jointly and $75,000 for individuals. The enhanced credit phases out for married couples filing jointly making $170,000 annually and individuals earning $95,000, though they’d still qualify for the regular child tax credit.
Families who would rather take the entire credit in a lump sum next year can do so by opting out of monthly payments through an IRS portal. So far, about 1 million households have done this, the agency said.
Impact of the expansion
Beyond giving families with kids more money, the enhanced credit was also made fully refundable to ensure relief would reach the poorest households.
A fully refundable credit means that families don’t have to have any taxable income to claim the benefit. This will reach about 27 million children, representing half of the Black and Latino youth who previously did not get the credit, according to the Center on Budget and Policy Priorities.
“It’s going to target the folks who need the support the most,” said Joanna Ain, associate director of policy at Prosperity Now, a financial literacy nonprofit organization.
With the change, the enhanced credit will reach nearly 90% of children, according to the IRS. It will also lift about 4.1 million above the poverty line, including 1.7 million who are Latino, 1.2 million who are Black and 814,000 who are Asian-American, according to the Center on Budget and Policy Priorities. This will slash the child poverty rate by roughly 40% and lift even more out of deep poverty, according to the Center.
Another estimate by the Center on Poverty and Social Policy at Columbia University found that the enhanced tax credit would slash child poverty by 45% and reduce poverty by 52% for Black children, 45% for Hispanic children and nearly 62% for Native American children.
The timing may also help offset programs that have helped families make it through the pandemic but are ending soon, such as additional unemployment insurance, the eviction moratorium and mortgage forbearance program.
Confusion for some families
Of course, some of these families may struggle to access the credit. If they traditionally do not file a tax return and did not use the IRS non-filers’ tool to claim an economic impact payment, they need to sign up for the money on the agency’s site.
That’s led to confusion for some. Nearly 80% of non-filers said that they’d heard only some, little or nothing about the new child tax credit, according to a recent survey by SaverLife, a nonprofit, and the Economic Security Project.
Still, families who sign up for the credit late will receive the full half they’re owed in advanced payments, according to senior administration officials. This would likely result in fewer but larger payments before December, according to the agency.
As I posted previously, here is the information about those IRS tools for non-filers:
Forbes reports, IRS Launches Child Tax Credit Eligibility And Update Tools:
Some 36 million families are eligible for advance payments of enhanced child tax credits for 2021, and the Internal Revenue Service has launched two new online tools to help taxpayers navigate this tax law change. There’s a Child Tax Credit Eligibility Assistant tool, and a Child Tax Credit Update Portal. These two tools follow the Child Tax Credit Non-Filer Sign-Up Tool launched earlier this month.
[T]he first new tool, the Child Tax Credit Eligibility Assistant, helps taxpayers figure out whether they qualify for the advance payments. If you determine you’re eligible, you would either file a 2020 income tax return or sign up using the Non-filer Sign-Up Tool.
The second new tool, the Child Tax Credit Update Portal, allows taxpayers to verify their eligibility for the payments and to unenroll or opt out of receiving the monthly payments. “The Update Portal is a key piece among the three new tools now available on IRS.gov to help families understand, register for and monitor these payments,” said IRS Commissioner Charles Rettig.
[M]ore updates are coming soon. You’ll actually be able to check the status of your payments. In late June, you’ll be able to update bank account information for payments starting in August. In early August, you’ll be able to update your mailing address. Future updates will let you update family status and changes in income.
Did you get a letter from the IRS saying you may be eligible? Watch out for a second round letter that will be a formal notification of the amount you’ll receive.
Most families don’t have to do anything if they want the advance payments. If you filed a 2019 or 2020 federal income tax return, used the non-filer tool in 2020 to register for a stimulus payments, or if you already registered for the advance Child Tax Credit payments using the Non-Filer sign-up tool. That tool, the first of the three Child Tax Credit tools, helps taxpayers who aren’t normally required to file an income tax return to easily register for the Child Tax Credit advance payments. The credit is nonrefundable, meaning you don’t need income to receive it (normally to take advantage of a tax credit you need income that it would offset).
The latest updates, including a link to FAQs, are posted on the IRS website on its Advanced Child Tax Credit Payments In 2021 page.
CNBC continues:
What’s next
Currently, the credit is only available for the tax year 2021, meaning that in December the monthly payments will abruptly cease.
But Democratic lawmakers are pushing to extend the benefit or make it permanent. President Joe Biden has proposed keeping the enhanced credit in the coming years in his infrastructure package, and several congressional Democrats want to make the benefit permanent.
“Our position has been clear — we must make the child tax credit permanent,” said Rep. Rosa DeLauro, D-Conn., at a press event on Wednesday. “We have a real opportunity here, not to just throw money at a problem, but to build an architecture for the future and use this as a moment to lift up all children and families.”
Note: Senate Democrats revealed on Wednesday key details of their $3.5 trillion budget framework, a starting point for a Democrat-only bill for “human” infrastructure that would enhance federal safety net programs. The budget framework extends the child tax credit under the American Rescue Plan, the earned income tax credit, and separate child and dependent care tax credits.
Even though legislation has not yet been passed, the Treasury Department and IRS are preparing for the the program to last more than a year.
“It is nobody’s plan that this will exist for just 2021,” a senior administration official said on a Wednesday call with reporters.
President Joe Biden will deliver remarks Thursday touting the expanded child tax credit, a provision of his administration’s Covid-19 relief package aimed at reducing child poverty.
Biden “will explain in clear language how the child tax credit works,” according to a White House official. “For every child under age 6, families will get $3,600, and for every child 6 to 17, families get $3,000.”
“The President will provide an overview of how some families may use this money, from basics like food and housing to new school supplies or after-school activities,” the official told CNN in an exclusive preview Wednesday evening.
Starting Thursday, the White House says, American families should expect to see payments on the 15th of every month — providing them with extra funds — through the end of 2021, with an accompanying tax break when they file their returns next year. The vast majority of families — roughly 39 million households, covering 88% of children — will get the credit automatically because they filed 2019 or 2020 returns claiming the credit. Families that file taxes electronically should see payments in their accounts Thursday that say “CHILD CTC,” while families that file via mail should expect checks in “several days,” per the administration.
The White House projects the payments will be “transformative” for families, leading to “the largest-ever one-year decrease in child poverty in American history,” the official said.
In his remarks highlighting the credit Thursday, Biden “will highlight the adjustments that were made to the CTC so that the families that need help the most get the full amount of this tax cut, as well as the return on investment it provides for our nation’s children.”
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