Millions of middle and low income families across the country will start receiving monthly payments beginning in mid-July as part of the new, fully refundable child tax credit. The first payments will be made on July 15 and subsequent payments will continue to be made monthly through the end of the year, the Treasury Department and IRS announced on Monday.
Roughly 39 million households will begin receiving automatic payments. That covers more than 65 million children, accounting for about 88% of all children in the U.S., according to the Biden administration. Eligible families will receive payments of up to $300 a month for every child under the age of 6 and up to $250 a month for every child ages 6 to 17.
The automatic advanced payments were included as part of the American Rescue Plan passed in March to provide relief for Americans amid the coronavirus pandemic. The Biden administration said the legislation is projected to lift more than five million children out of poverty this year, cutting child poverty by more than half.
The legislation increased the maximum child tax credit in 2021 from $2,000 to $3,600 for children under 6 and $3,000 for children 6 and up. It also made the credit fully refundable and turned half of the credit into the advanced payments.
The payments administered by the IRS will be made through direct deposit, paper check and debit cards. Payments will be made on the 15th of each month, unless that date falls on a weekend or holiday, the Treasury Department said.
Under the American Rescue Plan, individuals making up to $75,000, single parent head of household filers making up to $112,500 and married couples who file jointly with a combined income up to $150,000 per year are eligible to receive the full amount.
“The American Rescue Plan is delivering critical tax relief to middle class and hard-pressed working families with children,” President Biden said in a statement. “With today’s announcement, about 90% of families with children will get this new tax relief automatically, starting in July. While the American Rescue Plan provides for this vital tax relief to hard working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come. For working families with children, this tax cut sends a clear message: help is here.”
Mr. Biden’s proposed American Families Plan, introduced last month, calls for extending the increased child tax credit through 2025 and making it permanently fully refundable.
A group of Democratic lawmakers is pushing to make the monthly child tax credit payments permanent. Mr. Biden has indicated he would like to as well, but questions remain on how to pay for the provision, which could cost more than $100 billion a year, according to the nonpartisan Joint Committee on Taxation.
Meanwhile, some organizations that work with low-income families have already raised concerns that some of the most vulnerable families now eligible for the payments will not get them without a robust outreach effort. That’s because some families who are eligible for the credits are not in the IRS system because they earn too little money to be required to pay taxes.
The Treasury and the IRS said they were committed to maximizing the use of direct deposit to ensure “fast and secure delivery.” However, they will also continue outreach efforts with partner organizations over the coming months to help make sure families are aware of their eligibility.
Some Republican lawmakers have raised concerns about the IRS taking on the additional burden of delivering monthly checks to families on top of their tax administration responsibilities. This comes as the IRS has fallen behind on processing millions of income tax returns, potentially delaying refunds for millions of Americans. The new federal income tax filing deadline for individuals is Monday, May 17, having been pushed back by a month. The IRS said the change was to help overburdened Americans, not for internal reasons.
Taxpayers who do not wish to receive advance payments will be able to opt out. There will also be a portal for taxpayers to update their information such as income and number of qualifying children, though full information on these is not yet available.
Over the past year, the IRS has also played a vital role in administering other coronavirus pandemic relief, including helping to deliver three separate rounds of stimulus checks to millions of Americans. In the third round this spring, roughly 165 million payments have been delivered since March 12, totaling $388 billion.
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