Did you receive a surprise payment from the IRS into your checking account on July 15th? No this is not a scam, and more payments are likely on the way! Congress increased the Child Tax Credit for families as part of the coronavirus relief package this spring. Rather than receiving the entire tax credit at the time of filing their 2021 returns, families will now receive half of their credit in monthly payments throughout the remainder of the year and the other half at the time of filing.
According to the IRS, “Eligible families will begin receiving advance payments, either by direct deposit or check. The payment will be up to $300 per month for each qualifying child under age 6 and up to $250 per month for each qualifying child ages 6 to 17. The IRS will issue advance Child Tax Credit payments on July 15, August 13, September 15, October 15, November 15 and December 15.”
This credit is based on the parents’ modified adjusted gross income from 2019 and 2020 and the number and age of their children. The full Child Tax Credit will be available for joint filers making up to $150,000 per year, after which is begins to phase out.
The IRS website includes a tool where you can check to see if you’re eligible to receive these advance payments, enrolled to receive payments, to enroll if you are not, to stop getting advance payments or to update your bank account information. Please note that you will need to supply a picture of your ID or passport and set up dual factor authentication for security.
However, we caution clients from spending these advance Child Tax Credit payments right away. Since these are based on 2019 and 2020 tax returns, job changes, promotions and bonuses in 2021 could phase out a higher portion of the credits which wouldn’t be reconciled until tax returns are filed next spring. This may result in higher than usual tax bills for some families.
As always, feel free to call or email us with any questions.
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