PROVIDENCE, R.I. (WPRI) — In just a few weeks, the Internal Revenue Service (IRS) will begin sending out monthly child tax credit payments in advance of the 2021 tax season.
Those who qualify for the advance child tax credit will start to receive their payments starting July 15, according to the IRS.
“It helps those lower income families,” Amy Lins, senior director of enterprise learning at Money Management International (MMI) said. “The refundable nature of it helps those families with things like childcare, it helps them, you know, with food in the household.”
The child tax credit is nothing new, but there were some changes made to it through the American Rescue Plan, including an advance for 2021.
“It increases the tax credit depending on the age of the child and it allows parents to receive up to half of it in monthly installments between now and the end of the year,” Lins explained. “It created the advance, which means you get it now instead of when you file your taxes in 2022, up to 50% of it.”
Earlier this month, the IRS began sending letters to more than 36 million Americans who could qualify based on their most recent tax returns.
Lins said those who don’t file taxes are still eligible, and the IRS recently added a website link to help those who fall under that bracket.
“If they are a non-filer, they can click that button and give that information to the IRS to allow them to receive this refundable tax credit,” she explained.
Those who qualify for the advance child tax credit based on a modified adjusted gross income (AGI) include:
- A single person who makes $75,000 or less
- Heads of household who make $112,500 or less
- Couples who file a joint tax return of $150,000 or less
“Parents also have an option, if they don’t want to receive it in the monthly installments, that 50%, they can opt out,” Lins said.
The American Rescue Plan also raised the maximum tax credit and increased the age limit:
- Each child under the age of six will qualify for a tax credit of $3,600
- Each child ages six through 17 will qualify for a tax credit of $3,000
According to the IRS, the entire credit will now be fully refundable, “even if they owe no federal income tax.” Prior to 2021, only $1,400 was refundable per child.
The IRS has created a page specifically for the advance child tax credit.
“I expect there will be a lot more instructions on the site as to what people can and can’t do,” Lins said.