Roughly 90% of U.S. households with kids will receive the first of six payments on July 15 as part of the expanded Child Tax Credit signed into law under President Joe Biden's American Rescue Plan in March. Payments will continue each month through December.
The IRS launched a portal for non-filers to sign up to receive the CTC by inputting information including their name, address, direct deposit information, Social Security number, and details about their children. This tool is for people who have not filed a 2019 or 2020 tax return and who did not use the IRS non-filers tool in 2020 to register for stimulus payments.
Although the payments comes to parents, it can be used however families want or need.
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"At Treasury, our goal is to make sure that every American can get the relief funding they need as simply as possible," Treasury Secretary Janet Yellen said in a recent statement. "We know working families can't put off paying for doctor's visits or grocery bills, and this new tool will help more people get their tax credit every month, starting in July."
Here's what you need to know as Child Tax Credit payments begin.
First, it helps to understand how much you might receive. For 2021, the CTC is fully refundable and worth up to $3,600 for children 5 and younger and a maximum $3,000 for those ages 6 to 17.
For the first time, half of the CTC's value will be distributed in monthly installments as an advance on the 2021 tax credit. The rest will come when you file in 2022.
You'll qualify for the full credit if you're a single filer with a modified adjusted gross income of less than $75,000, a single parent filing as head of household with a MAGI of less than $112,500, or a married couple filing jointly with less than $150,000 in income. The credit phases out for taxpayers with higher incomes.
Wealthier families who may not qualify for the enhanced credit in 2021 can still claim the previous Child Tax Credit of up to $2,000 per child, which begins to phase out at $200,000 in income for single or head-of-household filers and at $400,000 for married couples filing jointly.
Check out Grow's calculator to determine how much you could be eligible to receive.
The IRS said the vast majority of payments will be made via direct deposit and families do not need to take any further action ahead of the July 15 start date. Others will be delivered in the form of a check. The government will not send any of the upcoming enhanced Child Tax Credit payments via debit cards, despite saying in May it would do so, a Treasury Department spokesperson told CNBC.com.
If the IRS doesn't have your information on file, the online portal will give you a chance to let the tax agency know you're eligible or that you had a change in circumstance last year that would make you eligible for a larger payment. For instance, if you had a baby, or your income fell, you may be eligible for a larger credit.
Taxpayers can expect the monthly payments to hit their bank accounts roughly halfway through each month, according to the IRS. The official dates are: July 15, August 13, September 15, October 15, November 15, and December 15.
Families who prefer to wait to receive the full credit when they file their 2021 taxes can use the portal to opt out of monthly payments. The IRS will also make paper forms available for those who don't have internet access, Commissioner Charles Rettig said April 13 in testimony at a Senate committee hearing.
Experts say some families may benefit from opting out of the monthly payments and waiting to redeem the credit in full when they file their 2021 taxes next spring. Delaying the credit could mean a larger lump sum when you file, plus it can offset your tax burden, and it limits the risk of an accidental IRS overpayment.
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