Millions of families should soon receive their fourth enhanced child tax credit payment, which the Internal Revenue Service distributed on Friday.
More than $15 billion was sent to families of roughly 61 million children, the Treasury Department and IRS said.
Eligible households have received a total of more than $61 billion since the first monthly payment in July.
Most parents automatically get the enhanced credit of up to $300 for each child up to age 6 and $250 for each one ages 6 through 17. The IRS is scheduled to send two more monthly payments in 2021.
But the agency has also had trouble getting the funds to some households, particularly poorer families – even though it has made multiple efforts to connect with them and set up a portal so they can provide the information needed to receive the credit.
Low-income households may not get the payments if they did not file 2020 or 2019 tax returns or if they didn’t use the IRS tool to claim their coronavirus stimulus checks. As many as 2.3 million children may be in families who have not filed recent returns, according to the Treasury Department.
Some 13% of eligible low-income households have not received the first two monthly payments and were either uncertain about how to claim it or did not know why they did not get it, according to a recent survey by the Poverty Solutions initiative at the University of Michigan.
The survey looked at 3,000 families with children under 18 who use a mobile app created by Propel, a tech company, to manage their food stamp benefits.
Parents who took the survey in Spanish were less likely to say they received the child tax credit payments in July and August than those who responded to an English questionnaire. This, along with other findings, suggests more outreach is needed to Spanish-language households, Poverty Solutions found.
“It is important that we take additional steps to ensure the CTC is reaching and supporting all eligible children and families who can benefit from this important investment,” said Natasha Pilkauskas, co-author of the survey analysis and an associate professor at the University of Michigan.
The first two child tax credit payments lifted 3.5 million kids out of poverty, according to a recent estimate by Columbia University’s Center on Poverty and Social Policy. The child poverty rate was 11.5% in August, but it would have been 16.2% without the enhanced credits.
The initial payments also prompted a 25% decline in food insufficiency among low-income families with children, the center estimated.
Some 75% of low-income families said they used the additional funds to pay bills, Poverty Solutions found. About 14% reported using the money for school supplies, and 11% spent it on school clothes or uniforms.
Middle-class Americans have also benefited from the monthly payments, the Treasury Department said, pointing to two studies.
Some 55% of middle-income families spent the funds on food, 26% on clothes and 23% on school and after-school expenses, according to a Census Household Pulse Survey conducted within weeks of the July installment.
And some 42% of middle-class households said they would contribute to their children’s college funds and 24% plan to use the money to pay for child care, according to a recent survey by Washington University’s Social Policy Institute.
The expanded child tax credit, which was created as part of the $1.9 trillion coronavirus relief package in March, is in effect only for 2021.
The Democrats’ $3.5 trillion budget reconciliation package seeks to extend the credit through 2025 and make it fully refundable permanently. However, these provisions could be at risk as lawmakers seek to reduce the cost of the bill.
Here’s what else you need to know about the expanded child tax credit
The full enhanced credit is available for heads of households earning up to $112,500 a year and joint filers making up to $150,000, after which it begins to phase out.
For many families, the credit then plateaus at $2,000 per child and starts to phase out for single parents earning more than $200,000 or for married couples with incomes above $400,000.
More low-income parents are eligible for the child tax credit because the March coronavirus relief package made it fully refundable. It had been only partially refundable – leaving more than 26 million children unable to get the full credit because their families’ incomes were too low, according to Treasury Department estimates.
About half of Black and Latino children, as well as kids living in rural communities, received only a partial credit or no credit at all because of their families’ low incomes prior to the enhancement, said the left-leaning Center on Budget and Policy Priorities.
Parents who aren’t citizens can receive the payments for their citizen children as long as they have individual taxpayer identification numbers, or an ITIN, and their children have Social Security numbers.
Families can check their eligibility through this IRS website.
How much will I get?
That depends on your household income and family size.
Eligible families can receive a total of up to $3,600 for each child under age 6 and up to $3,000 for each one ages 6 to 17 for 2021. That’s an increase from the regular child tax credit of up to $2,000 for each child up to age 17.
When will I see the money?
Parents will receive half their credit on a monthly basis through the rest of the year. The payments will be made on the 15th of each month, unless that falls on a weekend or holiday.
They can claim the other half when they file their 2021 taxes next year.
Those who don’t receive their monthly payments until later in the year will still get half the credit in 2021.
Families who want to receive the payments as a lump sum can opt out of the monthly installments at the IRS portal.
Some parents may not want to get the monthly payments, particularly if their incomes increase this year. The payments are credits toward families’ tax liability for 2021 but are based on 2020 or 2019 income and household size. Some who get the advance credits could wind up receiving much smaller refunds – or even owing taxes – next spring when they complete their 2021 returns.
Lawmakers, however, protected lower-income parents from potential overpayments. Heads of households making $50,000 or less and joint filers with incomes of $60,000 or less will not need to repay any excess payments.
Do I have to do anything to get it?
The vast majority of families get the credit automatically because they filed 2019 or 2020 returns claiming the credit.
The IRS also sends the payments to Americans who previously used its non-filer portal to register for the stimulus checks.
But families who haven’t filed tax returns recently or used the non-filer tool must take action. They can use another IRS portal to register to receive the enhanced child tax credit. The sign-up tool allows users to provide the necessary information about their households and, if they choose, their bank accounts so the agency can directly deposit the funds.
Parents can also go to GetCTC.org to file simplified returns and claim the enhanced credit until November 15. The site, which launched in September, was developed by the nonprofit Code for America, in collaboration with the White House and the Treasury Department. It is available in English and Spanish.
The IRS portal has been criticized because the tool is only in English and does not work well on cell phones.