You may soon receive a letter from the Internal Revenue Service (IRS), but unlike other notices from the agency, you might be thankful to receive this one.
That’s because the IRS announced it has started sending letters to more than 36 million families who qualify for the new monthly child tax credit payments.
In March, President Joe Biden signed the $1.9 trillion stimulus package, the American Rescue Plan Act, into law. The legislation includes advanced monthly child tax credit payments from July 15 through Dec. 15.
The IRS determined a family’s eligibility based on information provided on the 2019 or 2020 tax returns or the Non-Filer tool. Last year, the IRS used the Non-Filer tool for those who were not required to file register for their stimulus payments.
This will not be the only letter a family can expect to receive. The IRS says it will also send out a second personalized letter with an estimated monthly child tax payment families can expect, starting July 15.
Do You Qualify for the New Monthly Child Tax Credit Payments?
You can expect to receive the monthly child tax credit payment if your income meets certain thresholds and you have a qualifying child.
For single filers, you qualify for the new child tax credit if your modified adjusted gross income is up to $75,000 for single filers or up to $150,000 for married filers. If your income exceeds these amounts, you may still qualify for a reduced child tax credit until it completely phases out. The credit phases out by $50 for every $1,000 earned for income thresholds above $200,000 for single filers and $400,000 for married filers.
To qualify for the monthly payments, your child must be 17 years of age or under and a U.S. citizen, national or resident alien. Your child must have a valid Social Security number, reside with you for at least half of the year, and be related to you. You must also provide at least half of their support, such as clothing, housing, food, utilities and other costs.
You must also claim the child as a dependent on your tax return.
How Much Can You Get for the Monthly Child Tax Credit Payments?
The American Rescue Plan expands the child tax credit temporarily for 2021 from $2,000 per child to up to $3,600 per child. Families with qualifying children at the end of 2021 will receive $3,000 for each child under the age of 6 ($3,600 for children ages six to 17). The IRS will start to make monthly payments from July 15 until the end of the year.
The IRS Monthly Child Tax Credit Payment Scheduled Dates
|Payment #1||July 15|
|Payment #2||Aug. 13|
|Payment #3||Sept. 15|
|Payment #4||Oct. 15|
|Payment #5||Nov. 15|
|Payment #6||Dec. 15|
You can expect a monthly payment of up to $300 for each child under the age of 6 ($250 for children ages six to 17). Since the total amount of the credit will equate to only half of the year’s credit, the IRS will allow families to claim the remaining amount when they file their 2021 tax return (in 2022).
The IRS says it will make payments by either direct deposit or paper check.
What Steps to Take to Get the Monthly Child Tax Credit Payments
Most families will not need to take any action to receive the payments. However, in certain situations, you may need to take action.
If You Are Considered a Non-Filer
Even if you are not typically required to file a tax return, the IRS is encouraging non-filers to file a tax return or use the non-filer tool (unless you previously used it last year). The IRS will have your information on file to pay your monthly child tax credit payments. In most cases, the IRS requires you to file a tax return if your income is at least $12,400 for single filers and $24,800 for married filers.
If You Earned Less Money in 2020 Compared to 2019
If you filed a tax extension and your income declined in 2020, you should consider filing your tax return soon. A tax extension extends the time to file to Oct. 15. However, since the IRS will base your monthly child tax payments on the tax information it has on file at the time of processing, you would benefit by filing your return before the deadline.
For example, let’s say you are single and have two qualifying children, ages 2 and 4. For 2019, you do not qualify for the monthly child tax credit payments, since you earned $175,000. However for 2020, you only had income of $65,000. Since your income declined, you would now receive a monthly payment amount of $600 ($300 x 2 qualifying children).
If You Had Some Tax Changes This Year
In addition to being able to make changes via your tax return, the IRS will allow you to update changes about your tax situation using the Child Tax Credit Update Portal. However, the IRS has yet to announce when the online portal will become available. The online portal will allow you to update the following information:
- Changes to your income
- Filing status
- Number of qualifying children
- Update banking information
Opting Out of the Monthly Child Tax Credit Payments
Not all parents may want to receive the new monthly child tax credit payments. Instead, they may want to receive the full payment when they file their 2021 tax return in 2022. Therefore, the IRS says that you can opt out of the payments altogether by using the Child Tax Credit Update Portal.