July 15 was the debut of payments for the Advance Child Tax Credit, an ambitious federal program seeking to minimize the economic fallout of the COVID-19 pandemic on children. Some families are entitled to thousands of dollars by the time next tax season rolls around. While the Internal Revenue Service will be doing most of the work themselves, it’s important for taxpayers to know what’s going on so that they can avoid any unwelcome surprises.
Jeff Butler, owner of Liberty Tax Service in Franklin, says that the introduction of an Advance Child Tax Credit is one of the grandest moves in federal tax policy since Franklin Roosevelt was president. The American Rescue Plan not only beefed up the total payment families can receive from $2,000 per child to $3,000 for kids aged six or older and $3,600 for kids under age six, but it also set up the first half of those payments to come in monthly installments from July of 2021 through December of 2021. This is noteworthy, Butler said, because the most impoverished Americans can receive relief early – even those without a steady source of income.
“This could realistically give some families another dinner they can eat with their children,” Butler said.
If you are a United States resident who filed a 2019 or 2020 tax return, has at least one qualifying child dependent and has an income of less than $75,000 (or $150,000 for married couples filing jointly) then your job should be done, and you should receive your payments on schedule. If you didn’t file a tax return, you’ll need to give the IRS some extra information so that they know how to send you your payments. Eligible recipients should have received something in the mail from the IRS to give them a general idea of their next steps, but they also have explanations in place in case something goes awry with your payments.
“The IRS encourages people without current bank account information to use the tool to update their information so they can get the payments sooner,” reads a June release from the IRS. “The IRS also urges people to be on the lookout for scams related to the Child Tax Credit. People who need to update their bank account information should go directly to the IRS.gov site and not click on links received by email, text or phone.”
It’s more important to act if you want to stop the payments. Because the credit is being disbursed ahead of time, it’s possible for a family that’s eligible now to lose eligibility by the end of the year because of, for example, major changes in household income or competing claims on dependents. Families in that situation would have to pay the IRS back, so it’s probably best for them to opt out of the payments.
“Instead of receiving these advance payments, some families may prefer to wait until the end of the year and receive the entire credit as a refund when they file their 2021 return,” reads the IRS release. “The Child Tax Credit Update Portal enables these families to quickly and easily do that.”
These changes to the credit are among many controversial stakes in the American Rescue Plan. Critics have said that it offers tax refunds to people who don’t pay any taxes and that the income restrictions are set too high, causing too much of the funding to go to well-off families that don’t really need it. President Joe Biden, by contrast, thinks it will be a historic win for working families after COVID-19 wrote a devastating chapter in the history of the American economy.
“The Child Tax Credit in the American Rescue Plan provides the largest Child Tax Credit ever and historic relief to the most working families ever,” reads the White House’s webpage on the credit. “As of July 15th, most families are automatically receiving monthly payments of $250 or $300 per child without having to take any action. The Child Tax Credit will help all families succeed.”
Butler expects that Macon County families have a lot to gain from the program and he looks forward to seeing a positive impact in the community.
“We want to put a dent in child poverty in this country,” Butler said. “Lots of people are very angry about it, but there are a lot of people who think it’s the smart thing to do.”
For more information on the Advance Child Tax Credit, go online to www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-frequently-asked-questions.