Child tax credit: How will it work and when will parents begin to see monthly payments?

As more than 160 million direct-payment stimulus checks have been sent out, parents of children ages 6-24 will have some more federal funds to look forward to as the country begins to recover from the COVID-19 lockdown.

>> Read more trending news

Beginning in July, the expansion of the Child Tax Credit will give parents and caregivers anywhere from $250 to $300 a month. The American Rescue Plan Act not only bumps up the amount of the CTC, but it also allows those eligible to get the money beginning in the summer instead of having to wait for a credit when you file a tax return next year.

Last week, Charles Rettig, commissioner of the Internal Revenue Service, testified during a U.S. Senate Finance Committee hearing that the agency was working on the program to begin paying the monthly child tax credits beginning in July.

According to the American Rescue Plan, parents and caregivers will get six monthly payments – July through December – then be able to get the rest of the credit when they file income tax returns next year.

“We also expect to hire an additional 1,000 CSRs (customer service representatives) to be ready this summer with the funding provided in the ARP Act for implementation of the child tax credit changes, to address potential call volume increases,” Rettig said.

Here is what we know now about the credit, who qualifies and when you can expect to start getting the funds.

What is the Child Tax Credit?

The Child Tax Credit decreases a parent or caregiver’s tax bill on a dollar-for-dollar basis. The credit, which previously was $2,000, applies to each child under the age of 17.

The credit is available to those whose incomes are under a certain level.

For example, a person with three children younger than age 17 would be eligible for a $6,000 credit.

For the 2021 tax season, the CTC has been increased to $3,600 for children up to age 6, and $3,000 for children 6-17. If you have a child between the ages of 18 and 24, they can qualify for $500 each. However, if the child is between the ages of 19 and 24, he or she must be enrolled in college full time.

How does the CTC work?

The CTC allows parents and caregivers to reduce the amount of money they owe in federal taxes.

Using the example above with the new CTC amounts, if a person with three children under the age of 17 owes a $12,000 tax bill, the CTC would erase $9,000 of that bill, meaning the person would now owe $3,000.

What happens if you owe less than the CTC credit amount?

If the family had a tax bill of $7,000, the CTC would apply and the difference, $2,000, would be refunded to the taxpayer.

That is another difference in the 2021 tax season. The CTC credit is fully refundable to taxpayers, meaning if the credit exceeds the amount someone owes, that person will get the full amount of the difference refunded.

Last year, there was only a partial refund of up to $1,400 per child.

Who is eligible?

First, the child must have a Social Security number and be a U.S. citizen, national or resident alien. The child must be related to you and you must have provided at least half the child’s support during the past year.

To be eligible for the full 2021 credit, your adjusted gross income needs to be equal to or below:

  • $150,000 for those married filing jointly
  • $112,500 for head-of-household filers
  • $75,000 for single and married taxpayers filing separately

What must you do to get the 2021 child tax credit?

If you have filed either a 2019 or 2020 tax return and you fall under the income thresholds, you should be getting half the credit during the second half of 2021.

If your income level is much lower in 2020 than in 2019 and it makes you eligible for the credit, you should file your 2020 tax return before July. The IRS will use it to determine if you get the tax credit.

If you don’t have a 2020 return filed by July, the IRS will use your 2019 return.

A new IRS portal is set to be up and running by June. This portal will allow you to update any information that would make a difference in eligibility for payments, according to the IRS. For instance, if you have a child born in 2021.

The portal may also have a feature that will allow you to take your CTC payment as a lump sum next year instead of getting monthly payments.

When will the tax credit payments begin?

According to the new law, the IRS is directed to send monthly payments beginning in July to those who are eligible. The payments will continue until December.

There has been some question as to whether the IRS can get the program ready to send out monthly payments by July. Some have said the payments may be paid quarterly, or even be a one-time payment at the end of this year.

How much would monthly payments be?

According to the law, if the credit is paid monthly, the payments would be $300 a month for children up to age 6, and $250 a month starting in July for children 6 to 17 years old. Those payments would be directly deposited in a bank account or be in the form of a check sent to those who do not have bank accounts.

That would be $1,800 for children up to age 6 and $1,500 for children 6 to 17, or half the total tax credit. The other half of the credit would come when you file a tax return in 2022.

On Air102.5 The Bone - Real. Raw. Radio. Logo





    Stingray Chevrolet presents Calta Cruise 17 will set sea on April 4, 2024 from Port Canaveral on the BIGGEST boat we’ve ever taken!


    mobile apps

    Everything you love about theboneonline.com and more! Tap on any of the buttons below to download our app.

    amazon alexa

    Enable our Skill today to listen live at home on your Alexa Devices!