money Families can now update direct deposit information for Child Tax Credit payments
Families can now provide or update their direct deposit information for the monthly Child Tax Credit (CTC) payments through the Internal Revenue Service's upgraded online portal.
"The IRS urges any family receiving checks to consider switching to direct deposit," the agency said in a press release on Wednesday. "With direct deposit, families can access their money more quickly."
The monthly payments — made possible by the $1.9 trillion American Rescue Plan that also increased the CTC amount — start on July 15. But that first payment will reflect the direct deposit information the agency currently has on file.
Updates made before August 2 will apply towards the second payment that is sent out on August 13, while all subsequent updates will be reflected in the rest of the payments. Those who have no banking information on file will receive a check until the payment information is updated.
If eligible, the tool will show users whether they're enrolled to receive payment through direct deposit. If they want to update or add direct deposit information, they must provide a routing number, account number and indicate whether it's a savings or checking account. One account number is permitted for each recipient.
The maximum credit in 2021 is $3,600 for children under 6 and $3,000 for children between 6 and 17. The six advance monthly payments will be sent out on July 15, August 13, September 15, October 15, November 15, and December 15.
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.
Read more: Here's what's in Joe Biden's $1.9 trillion 'rescue plan' that could help your wallet
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 advanced 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.
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.
Read more: Taxes 2021: Credits, deductions, and tax breaks for student loans and college costs
Additionally, eligible taxpayers who don't want to receive advanced payments for 2021 can decline to receive the monthly payments, but the IRS has yet to detail how to do that.
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. He 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).
"We must not allow these critical expansions to expire after one year," 40 Democratic senators wrote in a letter in March. "Doing so would result in a significant spike in child poverty, after we have made historic strides to end it. It would mean that millions of struggling adult workers would once again be taxed into poverty."
Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova
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