Stimulus check update: Who qualifies for child tax credit up to $300 a month? Everything you need to know. – NJ.com

The IRS announced on Monday that monthly payments from the expanded child tax credit will start to hit people’s bank accounts or be mailed out on July 15.

The payments, part of the $1.9 trillion American Rescue Plan, are an advance on your 2021 tax return and are meant to help financially-strapped families during the coronavirus pandemic.

The payments, as high as $300 per month, will help lift 88% of children out of poverty, according to the IRS.

But not everyone qualifies, and of those who do, not everyone will get the full amount.

Here’s everything you need to know.

How much is the child tax credit?

The maximum 2021 child tax credit is $3,600 for each child under the age of 6 and $3,000 for every child age 6 to 17. The monthly payments of up to $300 or up to $250 will be sent out starting July 15th and will run through December. When the monthly payments end, the rest of the credit can be claimed on your 2021 tax return.

How much will I get?

It depends on your adjusted gross income (AGI).

Singles with AGI of up to $75,000 will get the full amount, and married couples who file a joint tax return and earn up to $150,000 will also get the full amount.

If your AGI is above those limits, you may still get a partial credit, but the amount will go down by $50 for every additional $1,000 of income.

Those who are not eligible for the higher amounts can still claim $2,000 per child — the credit that was available for your 2020 tax return — as long as AGI is below $200,000 for singles and $400,000 for those who are married and filing joint returns.

Which tax return is the credit based on?

The IRS will use your 2020 tax return to determine the amount you should receive, and if you didn’t file one, it will use your 2019 return.

If your situation has changed since you filed, such as if you had a new baby or a change in your income, the IRS said it is creating an online tool that will allow people to update their information. It’s supposed to be available before July 1, but further details are not yet available.

Does my child qualify?

To receive the credit, children must be a U.S. citizen, national or resident alien and also have a Social Security number. (You can learn more about how to get a Social Security number for a child here.)

The child must also be a dependent on your 2021 tax return.

What happens to divorced or unmarried parents?

Generally, whichever parent has custody of the child will claim the credit, but many people take turns, alternating who gets the credit in a given year. But with the advance payments, it could get complicated.

Because the IRS is basing the advance payments on your 2020 tax return, without taking any action, the IRS would send the payments to the parent who claimed the child in 2020. But that would result in one parent taking the credit two years in a row.

To avoid that, when the IRS releases its online tool, it’s expected that parents will be advised to update their information so the correct parent receives the credit.

If you receive the monthly payment in error, you may need to pay it back. But single parents with income of less than $40,000 and married couples who file jointly and earn less than $60,000 have some protection. They will not have to repay any amounts thanks to a “safe harbor” provision in the American Rescue Plan. Parents who earn more those amounts would reconcile any overpayments when they file their 2021 tax return.

Do babies born in 2021 qualify?

Yes.

But because the credit is based on past tax returns, you will need to alert the IRS about your new baby. The IRS new online tool, which will be ready by July 1, will allow you to update your information to get the monthly advance payments.

If not, you can always take the credit on your 2021 tax return.

I don’t have to file a tax return. What should I do?

This was an issue for many people when the IRS paid out the three individual stimulus payments. It had created the Non-Filers tool, which had allowed people to give the IRS the information it needed to send out the payments. But that tool is no longer accepting new entries.

You can still file a 2020 tax return, for free, even though the filing deadline of May 17 has passed. Learn more about the IRS Free File program on its website.

Your other option is to wait for the IRS’ online tool to become available.

Can my payments be garnished for unpaid debts?

Some can.

The IRS can’t take the payments for federal and state debts such as back taxes. It also can’t garnish the payments for back child support.

But if you owe money to a private debt collector, those funds could be garnished, the IRS said.

How long will the expanded credit last?

That’s unclear.

As of now, it’s only expanded for the 2021 tax year, but some Democratic lawmakers say they want to make the expanded credit permanent. The American Families Plan, legislation that hasn’t yet been voted on, calls for the larger credit to last through 2025.

The child tax credit is fully refundable. What does that mean?

Unlike past years, the 2021 child tax credit is fully refundable. That’s good news for lower income taxpayers. It used to be that you needed at least $2,500 of earned income to be eligible for the full tax credit. But now, you don’t need to have income to qualify. If you don’t owe any taxes, you would receive the child tax credit as a refund.

What if I don’t want the monthly payments?

You can notify the IRS when its online tool is available, and then you can take the credit on your 2021 tax return.

What else should I know?

The IRS said it will send letters to families that are eligible based on their 2020 and 2019 tax returns. It hasn’t said when the letters will go out, but it’s expected to be sometime before it opens the new online tool.

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Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com.