The extension of the children’s tax credit is considered one of the most important tax changes in President Joe Biden’s US $ 1.9 trillion bailout plan, as the measure will be paid monthly checks later this year to millions of families. But the IRS warns that families may suffer delays in receiving checks as they face sending out stimulus checks and handling their current fiscal season rights.
The relief bill revised the child tax credit (CTC) by extending the benefit from $ 2,000 a year to $ 3,600 per child, including families with the lowest income in the tax benefit, and distributing half the money through monthly payments. in cash. These monthly payments are expected to begin in July and extend through December and could provide a measure of financial stability to millions of families as the economy recovers from the pandemic.
“It could be a challenge to get out of the box monthly,” IRS Commissioner Charles Rettig told lawmakers Thursday. He added that the tax agency “will do everything possible.”
The IRS is under enormous stress given the pandemic and the additional workload of the last round of stimulus controls. Wednesday reported delivering 90 million stimulus checks to eligible adults and dependents, with plans to issue millions more over the coming weeks. At the same time, it is in the midst of tax filing season, and this week it did backfire deadline for filing statements is May 17th from its traditional April 15 deadline.
This delay in filing could jeopardize the child tax credit schedule, Rettig said. He added that he was not in favor of delaying the tax deadline because it will give the IRS less time to create a new online portal for children’s tax credit.
“We now have one month less to do the development,” Rettig said. “The same people who do the income tax processing, the IT departments, are the people who need to develop this portal. So I don’t have the resources to dedicate it until the end of the filing season, which is on May 17. “
Rettig did not provide many details about the portal. But it could be similar to the IRS site created last year for the distribution of stimulus checks called “Get My Payment,” which the agency reopened this week to allow people to track payment of the third round of stimulus checks.
How the children’s tax credit works
Prior to the expansion, the CTC provided a tax credit of $ 2.00 per child, which families could claim on their annual tax return. Typically, families received the money by refunding taxes.
But not everyone qualified to get the full CTC, and it was mostly lower-income families who didn’t get the full payment because of the income requirements. About 40 percent of the tax credit went to families earning more than $ 100,000, while only 15 percent went to households with less than $ 30,000 in income, according to a Brookings study. Previously, only those who paid income taxes qualified for the CTC, which left out many very low-income people.
The American Rescue Plan expands credit to include low-income families, but also has an income limit of $ 75,000 for single people and $ 150,000 for married couples. Households that earn above the income limit will still receive the $ 2,000 tax credit. But the millions of families earning below this threshold will receive the extended credit, which is $ 3,600 for every child under 6 and $ 3,000 for every child between the ages of 6 and 17.
The tax credit will be split between monthly payments between July and December, and the other half will be claimed on the returns. In practice, this means that a family of four with two children under the age of 6 raises $ 7,200 in tax credits, with half of what is paid monthly in the second half of the year, or $ 600 a month for six. months.
A monthly payment could provide a “step towards universal basic income” he told CBS MoneyWatch earlier this month.
Approximately 4 million children will be lifted out of poverty by fiscal expansion, according to the Center for Priority Budgets and Policies.
Rettig said he hopes the IRS can meet the requirement to start sending checks in July. He also urged everyone to file a tax return this year, including low-income people who would not otherwise be required to file an annual return, to make sure the IRS is aware of it and can direct payments.