The second enhanced Child Tax Credit payment worth up to $300 per child is set to hit parents' bank accounts next week on Friday, August 13.
In July, the IRS and the U.S. Department of Treasury sent out the first batch of checks totaling roughly $15 billion to families of nearly 60 million eligible children. The monthly aid is part of the American Rescue Plan that President Joe Biden signed into law in March.
"The vast majority of families and children received their advanced Child Tax Credit automatically because they either filed a 2019 or 2020 tax return, or they claimed an Economic Impact Payment," i.e., one of the recent stimulus checks, says Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center.
There's no hard data on how many eligible Americans are missing out on the payments, Maag says, "but we do know families who are getting checks are definitely benefiting."
Eligible Americans should expect to receive five more payments, distributed one per month between August and December. In addition to receiving a payment on Friday, August 13, the plan is to disburse checks on September 15, October 15, November 15, and December 15. (August's payment is two days earlier in the month because the 15th falls on a weekend.)
In total, the six payments amount to half of the full value of the tax credit. The second half of the credit will be applied when families file their 2021 taxes next spring.
The maximum Child Tax Credit for 2021 amounts to $3,600 per child under the age of 6, and $3,000 per child ages 6 to 17. 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.
Use Grow's calculator below to find out how much your family could get.
Last month, the IRS launched an online tool called the Child Tax Credit Update Portal which allows parents to verify whether or not they qualify for the advanced credit. The portal also makes it possible to change the bank account where the payment is deposited. In addition, it gives families the opportunity to opt out of the advanced credit so that when they file their 2021 tax return they can receive their entire credit as a lump sum.
To use the portal, parents will need to have an existing IRS username or ID.me account, or enroll for one using a photo ID.
"Some individuals, if their tax profile is a little more complex, using this tool may not be sufficient," says certified public accountant Sheneya Wilson, the founder and CEO of Fola Financial. "They may need to still contact the IRS if there are further issues when enrolling in this automatic payment." Low-income families who don't normally file taxes are more likely to experience these issues, she explains.
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Another problem with the portal is that "it's not mobile friendly," says Maag. "So you'll need to find a desktop computer to be able to use the site."
The benefits society will reap from the one-year expansion of the Child Tax Credit are worth eight times more than the program's overall cost, according to a new study from the Center on Poverty and Social Policy at Columbia University.
The credit will help increase children's health, education, and future earnings, and decrease health, child protection, and criminal justice costs, the study found, so taxpayers will recoup $84 billion of the initial investment.
Although the American Rescue Plan expanded the CTC just for 2021, Biden's American Families Plan proposes keeping the expanded Child Tax Credit through 2025. "I just don't know how it's going to play out," says Irwin Garfinkel, co-director of the Center on Poverty and Social Policy at Columbia University who co-authored the study. "I hope that it becomes permanent because if it doesn't, we would be forgoing lots of benefits and that would be a shame."
There's historical precedence for the CTC expansion to become permanent, says Maag: "Any time there's been a temporary increase to the credit, it has stayed." However, "there's always a chance that it won't remain in place, and I think that will be very destabilizing for low-income families," she says.
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