Consumer Credit Counseling Service News Articles
The federal Child Tax Credit (CTC) is kicking off its first monthly cash payments on July 15 to eligible families with children ages 17 or younger.
Almost 9 of 10 payments were sent via direct deposit according to the IRS and Treasury.
The enhanced Child Tax Credit is an expansion that boosts the credit from $2,000 to $3,600 for children ages 6 to 17. It also makes the CTC “refundable” which means people can get it even if they don’t owe federal income tax.
Not everyone will qualify. Single taxpayers must earn less than $75,000 and joint filers must earn less than $150,000, with payments reduced by $50 for every $1,000 of income above those limits. The enhanced payments phase out for single taxpayers earning $95,000 and joint filers earning $170,000 – but most households earning above those limits will still qualify for the regular $2,000 per-child CTC.
These payments will be sent each month until they end in December.
Here’s what American families need to know:
- Will I get my payment on July 15?
Best answer is maybe. If there is a delay, it is partly due to the time required by banks to process and settle the funds, at which point the money can be delivered to individual accounts.
The IRS will mail paper checks to people for whom it doesn’t have bank account information. Those paper checks could take one or two weeks to arrive.
- What are the dates for the other payments?
- What if I earn above the threshold?
The Child Tax Credit is still available for people who earn over $95,000 and joint filers earning $170,000 – but they will receive the regular CTC of $2,000 per child. That means they will receive monthly payments of about $167 through December, representing half of the $2,000 regular CTC.
- How will I receive the payments?
If you are a taxpayer and get your refund electronically deposited into your bank account, that’s how you’ll receive the CTC. In other words, if you’ve provided the IRS with your bank account information in order to receive a tax refund, the tax agency will directly deposit the CTC payment into that account. If you do not have a bank account or haven’t provided the IRS with your bank information, the agency will mail you a check.
However, if you want to make sure you are getting a direct deposit, you can check the IRS’ Child Tax Credit Update Portal. The online tool will also allow you to update your bank account information.
- What if I had a child in 2021 – how will the IRS know?
The payments are based on the most recent tax filing for families. A family’s 2020 tax return is the most recent data available to the agency, which wouldn’t include children born or adopted in 2021.
You can update your information to include a child born or adopted in 2021 through its Child Tax Credit Update Portal.
- I’d rather get a big refund next year – can I opt out?
The monthly payments represent half of the total credit, with the cash deposits running from July through December. For example, a family with one child under 6 will receive half of the $3,600 credit in cash, or $1,800, which will be split into six monthly checks of $300 each.
The remainder is claimed when you file your 2021 taxes early next year.
For tax payers that want to get a bigger tax refund in 2022 CAN opt out of the monthly payments and simply claim the entire $3,600 or $3,000 tax credit on their 1040’s.
To opt out, taxpayers should go to the Child Tax Credit Update Portal.
- Will I need to pay taxes on the CTC payments?
No. CTC payments are not considered income. Much like the stimulus payments, these are tax credits. But you should keep track of how much you receive from the IRS, because they will need to reconcile those payments on your 1040s in early 2022. That’s because half of the CTC will be claimed on your tax return, you will need to know how much you received to accurately report that information.
- Will I need to report the CTC payments on my taxes?
Yes. Because parents will claim the other half of the expanded CTC payments when they file their tax returns for 2021.
The IRS will send a letter to each household in early 2022 stating the amount of CTC received. You should keep that letter for your records.
Excerpted from: Aimee Picchi; MoneyWatch
Holli Lewandowski, Certified Credit Counselor, Educator, and Advocate