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IRS Says The Expanded Child Tax Credit for 2021 Will Start in July

by May 9, 2021Tax Accounting

The American Rescue Plan Act (ARPA) signed into law by President Joe Biden in March includes a provision for expanding the child tax credit for 2021.

Expanded Child Tax Credit to Provide Monthly Checks

Taxpayers should know that the expanded child tax credit is for 2021 only.  It is expected that half of the total 2021 credit will be disbursed in monthly payments from July through December 2021, and the other half can be claimed when 2021 income tax returns are filed.

As part of the stimulus package, the credit is planned as monthly payments instead of one annual payment in order to help families with a reliable monthly income for the remainder of 2021.

The $3,000 annual benefit per child 6 to 17 years old will be $250 each month.

For children younger than six, the family will receive $3,600 annually, distributed monthly at $300.

Get Your 2020 Tax Return Filed

Payments are based upon 2020 tax returns and will be issued automatically to those who have filed their 2020 taxes before the deadline. For most of the nation, the extended federal tax filing deadline is May 17th, and in Louisiana this deadline is June 15, 2021.  Louisiana’s additional extension is a result of federal relief for those affected by severe winter storms in February.

The July start for payments is assured by the IRS.  While the IRS is already stretched thin from delivering Economic Impact Payments, from managing extended tax deadlines and is behind on processing 2020 tax returns already filed, on April 13, the IRS Commissioner, Charles Rettig, assured the Senate Finance Committee that the expanded credit will begin in July.

“We fully expect to launch in July.  We expect to launch with payments going out on a monthly basis.”

Who Qualifies For This Revised Tax Credit?

Individuals with children and with an adjusted gross income (AGI) less than $75,000, and married couples filing jointly with an AGI of $150,000 are eligible for the full credit.

For those making more than those maximum amounts, the extra tax credit benefit will be less.

Individuals earning $95,000 or more and joint filers making $170,000 or more will not be eligible for the expanded child tax credit.  They will still be eligible for the standard child tax credit.  The standard child tax credit for those earning less than $200,000 is $2000 per tax year per child under 17.  For joint filers, the cut off is $400,000.

Need Help Filing Your 2020 Taxes?

For help with your income tax planning and preparation, give us a call.

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