It’s official: If you have kids in the house, keep an eye on your bank account starting in July.
The IRS, posting online guidance on the federal government’s new expanded 2021 child tax credit Wednesday, said those who qualify don’t have to do anything to get regular monthly payments between July and December. Income eligibility will be based on 2020 tax returns, or, if those aren’t filed and processed yet, 2019 returns.
The monthly payments of up to $300 will be an advance, since a 2021 tax credit wouldn’t normally be available until after 2021 tax returns are filed next year. The advance will account for half the credit amount, which was increased for 2021 to $3,000 per child (or $3,600 for children 5 and under) from $2,000. The other half will be claimed at tax time, as usual, though the IRS will give people the chance to opt out of the advance and get it all next year.
“The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they're eligible for the appropriate amount,” the agency said. Filing electronically with direct deposit may speed up the payments.
The overhaul of the child tax credit is part of the latest pandemic relief measure, the American Rescue Plan, enacted in March. Besides being bigger and doled out monthly, the 2021 credit is markedly different from earlier versions: It’s available even to those who don’t make enough money to qualify for a tax offset and it applies to children up to age 17, rather than only to those 16 and under. While the $3,000 or $3,600 is reduced for taxpayers making more than $75,000 a year (and couples making more than $150,000) one nonpartisan group estimated 90% of all children in the U.S., or 65.7 million, would benefit.
The IRS said it would soon explain how to opt out of advance payments and update income or other pertinent information on file. Otherwise, the payments will be distributed automatically, an IRS spokesman said.
IRS Commissioner Chuck Rettig told Congress earlier this month that the agency would set up a “user-friendly” web portal.