The Internal Revenue Service sent the fourth set of monthly Child Tax Credit payments worth $15 billion to 36 million families. The average payment was $430.
“Since July, the advance Child Tax Credit has provided monthly direct assistance to families to help them cover basic household essentials like food and childcare,” Deputy Secretary of the Treasury Adewale Adeyemo said in a press release on Friday. “It’s clear this tax relief is meaningfully improving the lives of children in every corner of the country, which is why Congress must act to extend it so these monthly payments don’t end after December.”
The round marks the fourth advance payment of six that the IRS will send this year. The monthly payments — made possible by the $1.9 trillion American Rescue Plan that also increased the credit amount and made it fully refundable — will be distributed monthly through December.
Fewer than 2% of CTC recipients didn't receive their payment on time in September but "payments have since gone out to affected individuals," the IRS said in a press release on Friday.
So far, $61 billion worth of CTC payments have been delivered to eligible families. The next payments will be distributed on November 15 and December 15.
Early data showed that the first payment helped relieve financial hardship and alleviate food insecurity, according to the Census Bureau Household Pulse Survey (HPS). Forty percent of Americans said their first payment went to pay debt, while 32% said they mostly saved the money and 27% said they mostly spent it.
The maximum credit in 2021 is $3,600 for children under 6 and $3,000 for children between 6 and 17. Families will get half of their credit distributed in six installments.
Here’s what else you need to know about the monthly payments.
How much will my payment be?
Eligible households will receive half of their total payments in advance over the next six months beginning in July and ending in December. The monthly payments will be $250 for older children and $300 for children under 6.
The amount will be determined by their 2020 tax return. If that return is not available, the IRS will use their 2019 return.
A single filer with children under 17 making up to $75,000 will receive the full payment for each child, while those earning up to $90,000 will get a reduced amount. Joint filers with children making up to $150,000 will get the full credit for their child, while those earning up to $170,000 will receive a smaller amount.
Single filers making over $200,000 and joint filers making over $400,000 will be eligible for the old credit, which is $2,000 per child under 17.
Who is eligible?
The IRS will use your 2020 federal tax return and income to determine whether you’re eligible for the credit. The advance payments equal half of an eligible household's total credit, while the remaining half of the credit can be claimed on your 2021 tax return.
The payments would be made to eligible taxpayers who have a main home in the U.S. for more than half a year.
The CTC was also made fully refundable, which allows taxpayers to get the credit as a refund even if it’s worth more than what they owe in taxes. More than 26 million children who would previously receive less than the full CTC credits are now receiving the full credit, according to estimates by the Treasury Department.
Households of approximately 65 million children — or 88% of U.S. kids — will be eligible, the Treasury Department said in May. The payments will be delivered through direct deposit, paper check, or debit cards.
What should I do to claim the credit?
Most taxpayers shouldn’t take additional action to file for the credit besides filing their 2020 tax return if they haven’t done so already.
Families that do not normally file a federal tax return but provided their banking information through the IRS Non-Filers tool for the stimulus payments will automatically get the CTC payments. This affects more than 720,000 children whose families otherwise wouldn't have received the payments.
Families who received their first monthly payment in September will still get their total advance payment for the year, meaning their total payment will be spread over the remaining four payments. That means each payment is up to $450 per month for each child under age 6 and up to $375 per month for each child ages 6 through 17.
How to opt out of the CTC payments?
Families have the option to opt out of the monthly payments and can do it three days before the first Thursday of the month so they're unenrolled for that month and the following months of payments.
Taxpayers can use "The Child Tax Credit Update Portal" to unenroll from the monthly payments. They will instead receive the full credit after they file their 2021 tax return.
Unlike the three rounds of stimulus payments, the CTC payments have to be paid back if too much was given. Families that usually owe taxes to the IRS, saw their incomes increase significantly this year, or recently filed for divorce may want to consider unenrolling from the monthly payments, according to tax professionals.
Can the credit become permanent?
As part of his American Families Plan, President Joe Biden is proposing to extend the expansion of the CTC through 2025. The House Democrats' proposal also includes an extension of the credit for the same period. Biden has previously said that the administration aims to make the benefit permanent.
Some lawmakers also support making permanent the expansion of the CTC and the expanded Earned Income Tax Credit (EITC).
"Unless Congress acts to extend the advance Child Tax Credit, Treasury and the IRS will deliver the final monthly payments on December 15th," the Treasury Department said in a press release on Friday. "Absent an extension, the families of roughly 61 million children currently benefiting from this reliable relief will face tighter monthly budgets and difficult choices to make ends meet."