Have kids? Like an extra $300 a month to plan for their future? No, this isn’t some sort of late night infomercial, I’m talking about the updates to the child tax credit as a result of the American Rescue plan back in March.
If this one slipped past you, don’t worry. With all you’ve been trying to keep up regarding your business, it’s understandable and can be forgiven. That said, it’s definitely worth reading about, as there are parents that will need to reach out to the IRS in order to qualify for this payment. We understand you work hard, and that’s why we try to put out information that
How Much Will I Get From the Child Tax Credit?
For each child 5 years and younger, you will receive $300 each month. For Children 6-17, you will receive $250 each month.
Who’s Entitled to the Child Tax Credit?
All those with children under the age of 18, and who earn no more than $75,000 as a single filer, or $150,000 as a couple filing jointly, are entitled to the full amount of the Child Tax Credit.
What if My Income Exceeds the Cap For the Child Tax Credit?
If your income exceeds $75K/$150K, the payments will be reduced by $50 for each thousand in excess of the cap. That said, no amount of income prevents you from collecting the $2,000 credit that existed prior to the recent update in March.
Is There Anything I Need to Do to Get My Child Tax Credit Payments?
If you just had a child, or recently took custody of a child through adoption or divorce proceedings, YES, you should absolutely reach out to the IRS and let them know you have a new dependent in your household.
You can do that by heading over to the IRS Portal where you can handle anything you need to do regarding the CTC.
When Will I Get My First Payment?
You should receive your first payment sometime in the middle of July (yes, a week from now). This payment should be delivered in whatever method you have used to receive refunds, stimulus checks, in the past.
That said, sometimes there’s an unexpected change. I personally had received money from the IRS via direct deposit for years, yet my most recent payment from them was in the form of a paper check.
How Do Payments Work?
As it stands now, payments will be sent out mid-July, and continue each month through the end of 2021. That will represent half the payments, then the other half will be given to you when you file your 2021 taxes in April of 2022.
Fair warning: with the delays being experienced by those waiting for their ERC Credits, I wouldn’t count on getting this second payment quickly. You’ll get it, but maybe not in the timeframe the IRS is suggesting currently.
I hate to say it, but the federal government is probably on the bottom of the list in regards to consistency and reliability of service. If it was between them and the cable company, I’d prefer the cable company process my payments.
Important Advice Regarding the Child Tax Credit
Don’t take it! To be clear, I’m not saying to reject the money, but head over to that IRS portal and opt not to accept the monthly payments. Instead of 12 x $300, or 12 x $250, which is helpful, but not a HUGE windfall, you can have a $3,000-$3,600 check or payment waiting for you right at tax time.
That’s right, the IRS offers you the option to reject the monthly payments directly to you and allow that to collect in your account with them. If you’re able to forego the temptation to add a few hundred dollars to your monthly spending fund, you can make a substantial difference for yourself and family at tax time.
It may be too late to opt out for July, but not for the remainder of the payments. Get over there NOW and make a change!
It’s no secret: finances are the #1 source of stress for Americans, and unlike the holidays or vacations, there’s nothing you can do to avoid them. Simply pretending that this tax credit doesn’t exist until next year will allow you to put a substantial dent in your taxes once it’s time to file in April.
I argue that this is an opportunity for many families, particularly young families, to establish a pattern that will benefit them years and decades down the road. It’s not going to feel like you’ve lost anything by rejecting these monthly payments, but you will absolutely feel as though you’ve won a small lottery when your accountant says “well, you owed $9,839, minus the $3,600 tax credit, coming to $6,239.”