Here's What You Need to Remember: Eligible parents can now collect as much as $3,600 per year for a child under the age of six and up to $3,000 for children between ages six and seventeen. What this means is that beginning July 15, a $250 or a $300 direct cash payment for each child will head into the bank accounts or mailboxes of parents every month till the rest of the year.
Many financially struggling American parents already have July 15 circled on their calendars, as that is the date when the first batches of expanded child tax credits approved under President Joe Biden’s American Rescue Plan begin to head out to eligible bank accounts.
Do take note, though, that those modest monthly payouts might seem like pocket change when compared to another tax credit that’s also targeting cash-strapped parents. Keep in mind that particular “stimulus” could reach as high as an eye-opening $16,000.
How can parents get their hands on such a hefty sum? As part of Biden’s ambitious stimulus bill, individuals who pay out of pocket for child care services can now collect those related expenses in the form of tax credits of $8,000 for one child and up to $16,000 for two or more children.
According to the Internal Revenue Service, to be eligible for the full tax credit, a household’s adjusted gross income must be less than $125,000—and if the income eclipses that amount, the credits will phase out at a 50 percent clip. The rate will phase down again to 20 percent for those earning $183,000 and will stay at that level until the income hits $400,000. And for those earning $438,000 or more, the tax credits will completely phase out.
To make life easier when tax season arrives next year, the IRS is recommending that parents take action now. They should keep all receipts and forms that show what was paid to babysitters, nannies, daycare, and camps, among others.
Then during tax season, make sure to fill out Form 2441 and attach it to the completed tax return. The IRS will handle the rest.
Be aware that these particular credits are entirely different from the expanded child tax credits, which are also from the American Rescue Plan.
Eligible parents can now collect as much as $3,600 per year for a child under the age of six and up to $3,000 for children between ages six and seventeen. What this means is that beginning July 15, a $250 or a $300 direct cash payment for each child will head into the bank accounts or mailboxes of parents every month till the rest of the year.
The IRS has also launched two new online tools that are specifically designed to assist families manage and monitor the monthly payments from the credits. The first one—called the Child Tax Credit Eligibility Assistant—will allow parents to answer a series of questions to determine whether they qualify for the checks. The other tool—known as the Child Tax Credit Update Portal—will allow “families to verify their eligibility for the payments and if they choose to, unenroll, or opt out from receiving the monthly payments so they can receive a lump sum when they file their tax return next year,” the agency’s release writes.
Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn. This article first appeared earlier this year.