7 Things To Know About Enhanced Child Tax Credit
(CBSDFW.COM) – Millions of American families with children received their first monthly child tax credit payment from the federal government on Thursday. An estimated 36 million families nationwide, including 3.4 million in Texas, will benefit from the largest child tax credit ever.
Here's what you need to know.
1. Child credit increased to up to $3,600 per child
The child tax credit is not new concept. In previous years, parents filing taxes claimed a $2,000 credit per child.
Under the new rules, parents can claim $3,000 per child ages 6 to 17 and $3,600 for each child under the age of 6.
Single parents making $75,000 or less and married couples with an income of $150,000 or less qualify for the full amount. For every $1,000 of additional income, there's a $50 decrease in the total credit.
2. Money comes early, starting July 15
Half of money this year will be given in advance in six monthly payments starting July 15th.
The IRS said 86% of eligible families will receive their payments by direct deposit. The remaining 14% will be issued a paper check which will take longer to arrive.
"That's going to help a lot of families still struggling from the pandemic," said Dallas financial expert Jeff Dargatz. "This is cash in hand now. People can spend it now. They don't have to wait."
3. Most families don't need to do anything
For most eligible families who filed a 2020 or 2019 tax return, the IRS has all the information it needs so the payments will be automatic.
The IRS has created three online portals to help answer questions and resolve issues with the enhanced child tax credits. The advance child tax credit eligibility assistant is a questionnaire to see whether a family is eligible.
4. Some families will have to wait until September update information
If you recently moved, changed bank accounts, or had a baby; the IRS might not have the information it needs to send you the correct amount for your advance child tax credit. Currently, there is no way to inform the IRS of these changes. However, the IRS is working on an online portal where people will be able to enter this information. The portal is expected to be ready by September. If any advanced payments were missed, the IRS will send larger payments in the fall.
5. Non-filers need to sign-up
Families who don't make enough to file taxes need to provide the IRS with information to receive the benefit.
Much like with the stimulus payments, the IRS has a non-filer child tax credit sign up tool for people to enter their information.
6. Some families with bigger 2021 incomes may want to opt out
If a family's income in 2021 is significantly higher than last year, the IRS might overpay the benefits as payments are based on 2020 tax returns. This would only apply to families who exceed the income thresholds.
Parents can opt out of the advance payments by using the child tax credit update portal.
The IRS say the portal will also eventually allow taxpayers to update information such as bank accounts and home addresses as well as allow people to check the status of payments. The IRS says those features will be available on the portal later this summer or in the fall.
7. Beware of scams
"Anytime the government is pushing out a lot of money in a new program like this, beware of scams," said Bob Probasco, the director of the Texas A&M Law School Low Income Tax Clinic. "People will be sending emails or text messages saying, 'We can help you get your advanced child tax credit more quickly, if you send us money?' People will be coming out of the woodwork, trying to get our hands on that money."
