Info on Payments & Avoiding Repayment
By Maitefa Angaza
Brooklyn residents saw some of the evidence locally when the U.S. Bureau of Labor Statistics reported that close to 3 million women nationwide had exited the workforce during the pandemic. And Brooklyn women, through their own experience, know that the vast majority did not leave by choice. Many were furloughed and more laid off, as businesses shuttered in the devastated economy. Still others had no choice but to return home when childcare centers and schools closed. Single-parent households were most affected and the number of children living in poverty increased dramatically.
The Biden-Harris Administration’s revised and expanded Child Tax Credit will be a game-changer for many struggling families. This is because the monthly advance payments, headed to 39 million families with close to 65 million children starting July 15th, will include parents whose low incomes exempt them from filing taxes. The cruel irony is that up until now, 27 million children were excluded from Child Tax Credit eligibility because their parents’ incomes were too low! Those more fortunate should know that the ceiling on income is $112,500 for a single head of household and $150,000 for a married couple filing jointly.
Formerly a flat $2,000 per child annually, the revised allocation is part of the Administration’s $1.9 trillion American Rescue Plan, will now pay up to $3,600 for younger children and up to $3,000 for older ones. The monthly allotment will vary based on income level and need, determined by 2019 0r 2020 income tax filings. Parents will be automatically enrolled and are already being contacted by the government with details on the amount of money they can expect to receive. Other information is available now at an IRS online portal, where families can calculate eligibility and opt out of monthly payments in favor of a lump-sum return: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.
Parents who don’t file returns can access the Child Tax Credit Non-filer Sign-up Tool: https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool. However, one of the criticisms of the new system is that it isn’t available on mobile phones and many low-income people do not own computers. This will certainly need to be fixed.
When the money arrives, all eligible families will receive half of the annual Child Tax Credit allotted per child in monthly installments of up to $300 for children from birth to age 5 and up to $250 for those ages 6-17. (One-time payments of $500 will be made in 2022 to 18-year olds and to 19-24 year-olds in college.) After July, payments will be made on August 13th, then on the 15th of the month through December. Payment for the six months leading up to July will be claimed on the 2021 tax return. Parents who have children with disabilities can still apply separately for the Child and Dependent Care Credit to help offset expenses related to childcare that enables a parent to work.
Must Be Citizen
In order to be covered by the plan, children must be U.S. citizens with Social Security numbers, U.S. nationals, or U.S. resident aliens. It’s being urged by some lawmakers and policy groups that tax-credit eligibility (suspended in 2017) be restored to the 675,000 immigrant children with an ITIN (Individual Taxpayer Identification Number) in place of a Social Security number. All children must live, at least half the time, with the custodial parent or guardian who will be the sole recipient of the Credit, with some exceptions made for temporary absences and for children whose parents are divorced or separated.
Half-siblings, grandchildren, stepchildren, and foster children who are claimed as dependents are covered. About 80% of payments will be direct deposited into parents’ bank accounts. Checks will be mailed to parents who do not have bank accounts. A debit-card payment system is said to be planned, but at present has no rollout date. It would be the best option after direct deposit, eliminating check-cashing fees and making payments accessible to homeless families and those without a stable address.
The new plan opens a formerly closed pathway to assistance for those who need it most. The Center for Budget and Policy Priorities strongly urges that the revisions and expansions be made permanent. If so, says the Center, the aid to those 27 million children will cut child poverty in the United States by 40%. The Biden-Harris Administration has proposed extending the Child Tax Credit to 2025; a group of Democratic lawmakers — including Rosa DeLauro, a Connecticut congresswoman who’s pushed this upgrade for 18 years — are calling for the new credit to be made permanent. Of the 27 million children who would get the full credit permanently, says the Center, “… an estimated 9.9 million are Latino, 8.8 million are white, 5.7 million are Black, and 813,000 are Asian.”
Careful, don’t have to repay
It’s important to pay close attention to the new policy and its applications in order to avoid unwelcome surprises, such as having to repay American Rescue Plan funds sent to your household. There are allowances for life changes — that just makes sense. On the positive side, if your family has a new baby that wasn’t born at the time you filed your 2020 return, you can receive tax credit money for that child now by notifying the IRS. On the other hand, if your child has aged out of Child Tax Credit eligibility and you neglect to inform the IRS, you might end up having to pay money back. Similarly, if you get a salary increase or financial boon that lifts you above income thresholds, you must inform the IRS, or you’ll have a bill to pay when you get your tax return in 2022. Additional info is available at the portals above.
Lump Sum Payments
Before the pandemic some families receiving the previous Child Tax Credit opted for a lump sum payment, preferring to save for large expenses such as buying a home, paying tuition, going on vacation, etc. If parents would like to choose this option again, they must now choose “Unenroll” on the IRS portal; if not, monthly payments will be sent automatically. The expanded program, if made permanent, is hoped to help poor families approach middle class. Until that happens, most will welcome monthly payments with the potential to make a difference in their quality of life.