IRS notifies 36 million families that may qualify for monthly Child Tax Credit payments
The Internal Revenue Service is mailing 36 million American families who may be eligible for monthly child tax credit (CTC) payments by July.
“The letters are going to families who are eligible based on information they provided on either their 2019 or 2020 income tax returns, or who used the Non-Filers tool on IRS.gov last year to apply for an Economic Impact Payment to register “, the agency announced in a statement on Monday.
The US $ 1.9 trillion rescue plan passed in March provides for a one-year extension of the CTC that increases the loan amount and allows it to be distributed in regular prepayments.
The maximum tax credit in 2021 is $ 3,600 for children under 6 years old and $ 3,000 for children 6-17 years of age. Previously, the maximum tax credit was $ 2,000 per child under the age of 17.
Photo: Getty Creative
The six monthly prepayments will be sent on July 15th, August 13th, September 15th, October 15th, November 15th and December 15th.
Families eligible for the credit will receive a second letter with an estimate of their monthly payments. The amount will be determined in the 2020 tax return. If this return is not available, the IRS will use their 2019 return.
Here's what else you need to know about monthly payments.
How much will my payment be?
Eligible households will receive half of their total payments in advance over the next six months, starting in July and ending in December. Monthly payments are $ 250 for older children and $ 300 for children under 6 years of age.
A submitter with children under 17 who earn up to $ 75,000 will receive full payment for each child, while those who earn up to $ 90,000 will receive a reduced amount. Joint applicants with children up to $ 150,000 receive full credit for their child, while those earning up to $ 170,000 receive a lesser amount.
Single filers earning more than $ 200,000 and joint applicants earning more than $ 400,000 are eligible for the legacy credit, which is $ 2,000 per child under the age of 17.
House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer demonstrate the "American rescue plan" during the enrollment ceremony following the passage of the $ 1.9 trillion Coronavirus Disease Act (COVID-19) by US President Joe Biden on Capitol Hill in Washington. USA, March 10, 2021. REUTERS / Erin Scott
Who is Eligible?
The IRS will use your federal tax return and 2020 income to determine if you are eligible for credit. The prepayments are equal to half of the total credit of an eligible household, while the remaining half of the credit can be claimed on your 2021 tax return.
The payments would be made to eligible taxpayers who have had a primary residence in the United States for more than half a year.
The CTC has also been made fully refundable, which allows taxpayers to receive the credit as a refund, even if it is worth more than they owe in taxes.
Households with approximately 65 million children - or 88% of US children - will be eligible, the Treasury Department said in May. Payments are made by direct debit, check or debit card.
What do I have to do to get the loan?
Currently, besides filing their 2020 tax return, taxpayers should not take any action to apply for the credit if they have not already done so.
The IRS is also developing a portal where taxpayers who are eligible for the credit can update their information, such as income, marital status or dependents, which the agency says will be available in "the next few weeks".
Read more: Taxes 2021: Credit, deductions and tax relief for student loans and tuition fees
Additionally, eligible taxpayers who do not wish to receive advance payments for 2021 can opt out of receiving the monthly payments, but the IRS is yet to detail how to do so.
Can the loan become permanent?
As part of his American family plan, President Joe Biden suggests extending the CTC's expansion until 2025. He has previously said that the government is keen to make the performance permanent.
Some legislators also advocate permanent expansion of the CTC and the expanded Earned Income Tax Credit (EITC).
"We must not allow these critical extensions to expire after a year," wrote 40 Democratic senators in a letter in March. "This would lead to a significant spike in child poverty after we take historic steps to end it. It would mean millions of struggling adult workers being taxed into poverty again."
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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