The new child tax credit went into effect on July 15th,, and the Internal Revenue Service (IRS) wants to ensure that low-income families do not miss out. Millions of low-income families across the United States can benefit from the new child tax credit. As the recent expansion of the tax credit begins to roll out, it is more important than ever that the families who need it most know how to obtain it.
The Biden Administration and congressional Democrats have set out to reduce child poverty by nearly 50 percent in 2021. This significant expansion of the credit is an essential part of meeting that goal. The IRS will send half the credit to households in monthly installments, which began on July 15th and will continue through the end of 2021.
What Families Need to Do to Receive the Tax Credit
For families that have filed their 2020 or 2019 tax returns and claimed the regular child tax credit, parents do not need to do anything to get additional funds from the expansion. However, many low-income families may not have done so, especially those who do not earn enough to be required to file income tax returns.
Families who have not filed their returns for the past few years — or anyone who has used the IRS non-filer tool last year — will need to take action. The two options are to file taxes to receive the credit, or use the non-filer tool on the IRS website to file a simplified tax return.
“Although the exact number of children within families who have not filed their returns is unknown, it is estimated to be around 5 million,” says Attorney Matthew Dolan of Dolan Divorce Lawyers, PLLC.
How The Credit Will Help Families
The regular child tax credit was $2,000 per every child up to age 17 this year. With this enhanced child tax credit, eligible families can get half their credit from now through the end of the year. It will provide up to $300 a month for children under six years old and $250 a month for children between six to 17. Then, parents can claim the other half when they file their 2021 taxes next year.
According to the Democrat’s American Rescue Plan, the larger child tax credit allows families up to $3,600 for each child under six years of age and up to $3,000 for each child between six to 17. The total credit amount is available to heads of households earning up to $112,500 and joint filers making up to $150,000 a year. For those making more than these amounts, the benefits begin to phase out.
It has been difficult to reach families who have not previously filed their tax returns and could benefit from this child tax credit. The effort to get in touch with these families heavily relies on community groups across the country trying to educate parents about the child tax credit expansion and help them file their returns.
Fighting Poverty Through Government Relief
The American Rescue Plan makes this tax credit completely refundable, hopefully encouraging more low-income parents to take advantage of it. In the past, it had been only partially refundable. This fact has left millions of children unable to benefit from the entire credit because their families’ incomes are too low.
Unfortunately, the expanded credit is only in place for 2021 right now. However, Democrats are hoping to expand it to offer more assistance to low-income families who have not qualified for the whole child tax credit in the past.