IRS to start monthly payments of child tax credit July 15

The Biden administration on Monday announced it will start to make monthly payments of the expanded child tax credit on July 15.

Households that account for about 65 million children, or 88 percent of children in the United States, will receive the payments without needing to take any additional action. Payments will be made automatically to about 39 million households, the administration said.

The administration’s announcement, which coincides with Monday’s deadline for individuals to file their 2020 tax returns, provides more details about how the Treasury Department and the IRS plan to implement a key part of the coronavirus relief law President Biden enacted in March, called the American Rescue Plan Act.

“The American Rescue Plan is delivering critical tax relief to middle class and hard-pressed working families with children,” Biden said in a statement. “With today’s announcement, about 90% of families with children will get this new tax relief automatically, starting in July.” 

Biden’s coronavirus relief law expanded the child tax credit in several ways for 2021, in an effort to reduce child poverty.

One aspect of the changes to the credit is that the relief law directs the IRS to make advance payments of the credit on a periodic basis from July to December, so that people receive funds in installments throughout the year rather than a single payment when they file their 2021 tax returns. The advance payments are aimed at helping families to better plan their budgets.

Biden’s relief law also increased the maximum credit amount from $2,000 to $3,600 for children under age 6 and $3,000 for older children. Additionally, the law made the credit fully refundable, which will allow the lowest-income families to be eligible for the credit.

Treasury and the IRS said that families will receive up to half the amount of the credit to which they are entitled for 2021 in monthly payments from July through December, and they will receive the other half when they file their 2021 tax returns next year. Eligible families will receive monthly payments of up to $300 for children under 6, and up to $250 for children ages 6 and older.

The payments will be made on the 15th of every month, though they could come a day earlier or later if the 15th falls on a weekend or a holiday, the administration said. 

Of the roughly 65 million children in households that are expected to get the payments automatically, about 80 percent are in households that are slated to get the payments through direct deposit, while the remaining 20 percent will get the payments by paper check or debit card, senior administration officials said on a call with reporters. 

The advance payments will be made based on families’ 2019 or 2020 tax returns. The IRS plans to create a web portal, similar to the tool that non-filers could use last year to register to get their stimulus payments, in an effort to help get advance payments of the child tax credit to as many eligible families as possible. The IRS is also planning to create a separate web portal that people can use to opt out of the advance payments or provide the agency with information about a change in circumstances, senior administration officials said.

The details about the monthly payments come as Democrats seek to extend the one-year expansion of the child tax credit.

Biden has proposed in his American Families Plan to extend most of the expansion through 2025, while making the credit permanently fully refundable. Congressional Democrats across the ideological spectrum are pushing to make the full expansion of the credit permanent.

“While the American Rescue Plan provides for this vital tax relief to hard working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come,” Biden said. “For working families with children, this tax cut sends a clear message: help is here.”

Democrats on Monday cheered the administration’s announcement about monthly payments while also renewing their calls for the expansion of the credit to be made permanent.

“The Biden Administration worked tirelessly to get this program up and running in a matter of a few short months, and I am so grateful for their partnership in working to cut child poverty in half,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) said in a statement. “But now that nearly 90 percent of our nation’s children will benefit from this critical lifeline, we must make this change permanent.”

Senate Finance Committee Chairman Ron Wyden (D-Ore.) said that there need to be outreach efforts in the coming months to ensure that the lowest income families receive the monthly payments.

“To ensure this policy achieves its goals, outreach and education campaigns in the coming months are critical,” he said in a statement. “Children living in poverty are far more likely to live in families that do not file taxes, so there’s work to do to make sure families don’t fall through the cracks.”

Updated at 2:37 p.m.