Starting today, parents in Indiana and across the U.S. will begin seeing extra money added to their bank accounts.
The payments are part of an expanded child tax credit included in a massive, $1.9 trillion coronavirus relief bill called the American Rescue Plan Act, which was signed by President Joe Biden in March. Northeast Indiana’s Republican representatives in Congress – Rep. Jim Banks and Sens. Todd Young and Mike Braun – voted against the plan. The expanded tax credit is expected to cut child poverty by nearly half and help parents hit hard by the COVID-19 pandemic.
Here’s what you need to know:
What is the child tax credit?
It had been a $2,000-per-child credit for taxpaying parents with dependent children younger than 17 and was claimed on federal taxes. But that depended on filers’ income and left millions of U.S. children without access.
The expansion means a credit of up to $3,600, and families will receive monthly payments via check or direct deposit of up to $300 through December.
Who is affected?
About 39 million families, covering nearly 90% of U.S. children, will receive the payments, according to government estimates. Families with children younger than 6 will receive $3,600 ($300 per child, per month), and those with kids age 6 to 17 will get $3,000 ($250 per child, per month). Married couples making up to $150,000 annually are eligible for the full benefits. The income cutoff for those filing as head of household to receive full benefits is $112,500.
How are payments received?
The IRS uses banking information or addresses on file from 2019 and 2020 tax returns and earlier stimulus payments to directly deposit cash or mail checks. Payments will be made each month on the 15th, unless that date falls on a weekend or a holiday. After the lump-sum payments, the second half of the credit will be paid out when taxes are filed next year.
What if I didn’t file a return in 2019 or 2020?
Couples with annual income of less than $24,800 – and heads of household making less than $18,650 – can claim the credit through the IRS non-filer portal at irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool.
Will the payments affect eligibility for other government-funded programs?
Recipients of assistance through programs such as unemployment insurance, Supplemental Nutrition Assistance Program – also known as food stamps – and Medicaid will not be affected, according to the Center for Law and Social Policy.
Will recipients pay more in taxes because of the credit?
The Institute on Taxation and Economic Policy explains that, because it essentially is an advance payment on an available tax credit, it will not cause families to pay extra.
Why use direct payments rather than a tax-time credit?
Proponents, mostly Democrats, argue that payments can be used immediately by parents for essential items including food and diapers.
Most beneficial, direct payments can help reduce child poverty. An analysis by researchers at the Center on Poverty and Social Policy at Columbia University shows poverty reduced 45% for children younger than 18, under new policies. Poverty in Black children drops more than 52%, according to the analysis.
What happens after December?
The expanded child tax credit expires at the end of this year, though Biden and congressional Democrats are pushing to expand it.
More information about the credit is available at irs.gov/childtaxcredit2021.
Wayne Township Trustee Austin Knox said Wednesday he and his staff are directing potentially eligible clients to the IRS website.
“Some are, some aren’t,” he said, when asked whether those seeking help are aware the credit exists. “We’re trying to make sure everybody who is eligible has access.”