The IRS expects to begin sending checks in July to families who qualify for the new $3,000 child tax credit, Commissioner Charles Rettig told a Senate committee Tuesday.
The temporary tax credit is part of the $1.9 trillion American Rescue Plan that President Biden signed into law in March. It provides $3,600 per year per child under the age of 6, and $3,000 per child between the ages of 6 and 17, to be paid monthly.
Individuals with at least one child and a household income up to $75,000 qualify for the full credit, as do married couples filing jointly earning up to $150,000. The credit phases out above those income levels, ending at $95,000 for individuals and $170,000 for couples.
Qualifying taxpayers can expect to receive checks each month from July to December, with the rest of the benefit to be claimed when they submit their 2021 tax forms. According to the Tax Policy Center, roughly 80% of households with children will receive a benefit, with the biggest benefits going to those with the lowest incomes.
A new portal: The IRS will unveil an online portal on July 1 to allow taxpayers to update information about their households, Rettig said. There had been concern that the tax agency would be too overwhelmed by ongoing challenges form the pandemic and recent changes to the tax code to complete that job, but Rettig said he expected to be ready on time. The portal will be “the absolute best product we are able to put together,” he said, adding that it may require updates once the system is up and running.
The bottom line: Though it is scheduled to expire at the end of 2021, the new benefit represents a significant expansion of the existing $2,000 child tax credit. The cost of the child tax credit program will increase by $125 billion this year, according to an analysis by the Institute on Taxation and Economic Policy, while providing a 37.4% income boost for the poorest 20% of families with children. And it’s paid out as a cash benefit, rather than serving as a tax credit, allowing millions of very low-income households to participate.
