Congress has authorized massive child tax credits as part of President Joe Biden’s rescue package that was passed in March, with payments beginning to hit the pockets of American families in July.
The Biden administration announced Monday that the Internal Revenue Service will send the monthly child tax credit payments on the 15th of the month, starting in July and lasting until December, where families could receive up to $300 a month for each eligible child.
Taxpayers will receive half of the credit through the monthly cash payments, which could be between $250 and $300 a month for each child, and the rest of the tax relief can be claimed on their 2021 tax returns.
The bill boosted the tax credit from $2,000 to $3,000 and allowed parents with children under the age of 6 to qualify for $3,600. The measure also permits parents of children at an age of 17 be eligible for a tax credit.
But what happens if parents don’t file taxes by the May 17 filing deadline?
First, it’s important for taxpayers to file for an extension, which gives them until October 15 to file a 2020 tax return.
If that’s the case and a parent decides to request an extension, then it’s likely that the parents won't receive the monthly child tax credit payments.
Instead, parents could simply claim the credit next year on a 2021 tax return, but this will delay receiving the major tax break.
Eligible recipients of the child tax credit are single parents with annual incomes up to $75,000, heads of households earning $112,500 and joint filers making up to $150,000 per year. The amount will then drop by $50 for each $1,000 in income above these thresholds.
The credit is also fully refundable, and the $2,500 earned-income requirement has been eradicated.
Some low-income households that don’t normally file taxes will be able to enroll in a portal set up by the IRS. The portal will allow them to claim the enhanced child tax credits, as well as any other pandemic-related relief that they might have missed, like direct payments. In March 2020 when the coronavirus first struck the U.S., a similar portal was created for low-income families to claim relief from the Cares Act.
The agency also established a separate portal for families to update information like income, marital status and the number of dependents, along with being able to opt out of monthly cash payments for the child tax credit. Instead, they could choose to receive it in one big, lump sum next year when they file a return.
The IRS is expected to release more information about the portals in the upcoming weeks.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.