PROVIDENCE, R.I. (WPRI/AP) — Approximately 39 million families are set to receive monthly child payments beginning on July 15, according to the U.S. Treasury.
The payments are part of President Joe Biden’s $1.9 trillion coronavirus relief package, which expanded the child tax credit for one year and made it possible to pre-pay the benefits on a monthly basis.
Nearly 88% of children are set to receive the benefits without their parents needing to take any additional action.
“There’s nothing you have to do, its based on your 2020 tax form that you have already filed,” local CPA Anthony Ricci said. “Everyone is getting excited, because here it is summertime, you have more money in everybody’s pocket that will help to stimulate the economy and carry us through.”
Qualified families will receive a payment of up to $300 per month for each child under 6 and up to $250 per month for children between the ages of 6 and 17.
The child tax credit was previously capped at $2,000 and only paid out to families with income tax obligations after they filed with the IRS.
But for this year, couples earning $150,000 or less can receive the full payments on the 15th of each month, in most cases by direct deposit. The benefits total $3,600 annually for children under 6 and $3,000 for those who are older.
“The phase out is the $75,000 of earnings if your single or $150,000 of adjusted gross income if you’re married filing joint, so if your income is above that you’re not entitled to that extra payment,” Ricci said.
Ricci said things can get complicated since most people think they’re receiving monthly payments and a full child tax refund next year. He said that’s not the case.
“It gets extremely complicated real quick,” Ricci said. “Its an advance of the Child Tax Credit that you are entitled to when you file for next year’s tax return.”
“One of the key takeaways is don’t expect the $3,000 increase on your tax return when you file it next year,” he added.
The IRS will determine eligibility based on the 2019 and 2020 tax years, but people will also be able to update their status through an online portal, as well as the option to opt out of the monthly payments in favor of receiving the tax credit as a lump sum next year.
The administration is also setting up an online portal for non-filers who might be eligible for the child tax credit.