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But on Tuesday, when Senator Sherrod Brown, an Ohio Democrat and senior member of the Senate Banking Committee, asked Rettig if the IRS would be willing to start paying a monthly tax credit for children in July, he had a simple answer.
“We are,” said Rettig. “If we are ultimately not on track for an unforeseen situation, we will advise you and the committee.”
$ 300 per month for children under six
The full credit is available to individuals with children and adjusted gross income of less than $ 75,000, or $ 150,000 for a married couple filing jointly. The added benefit will gradually disappear for taxpayers making more money, stopping for individuals making $ 95,000 and married couples making $ 170,000 from filing jointly.
Taxpayers who earn more are still eligible for the regular child tax credit, which is $ 2,000 per child under 17 for families making less than $ 200,000 per year, or $ 400,000 for married couples.
“It’s trying to put the greatest benefit into the pockets of the lowest-income families,” said Elaine Maag, lead researcher at the Urban-Brookings Tax Policy Center, of the credit.
The extended credit is expected to be paid out to families monthly from July and will continue through December 2021. The monthly amounts are generally $ 250 for older children and $ 300 for children under six years of age. Families will claim the remaining half of the credit when they file their 2021 income tax return in 2022.
There is no limit to the number of children in a family who can receive the credit, as long as they meet the age and income eligibility conditions.
To receive the credit, families with children must file a 2020 tax return, Rettig said. If a family doesn’t file a return before 2020, the agency won’t have the information it needs to provide the credit.
“The safe way is to get a tax return now,” said Maag.
Unsurprisingly, the IRS has worked hard to deliver this benefit on time, but the real test will be in July, she said.
“Hopefully he’s right that they think they can give proper credit from July, but if not, they’ll do their best and maybe deliver a little later,” she said.
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The child discount is an important part of the plan to lift millions of children out of poverty. A family of four earning less than $ 150,000 could receive more than $ 14,000 in pandemic relief this year thanks to the expanded child discount and $ 1,400 incentive vouchers for both adults and children.
According to a study by the Institute on Taxation and Economic Policy, about 83 million children live in households that would benefit from the extension of the child tax credit. In addition, the poorest 20% of households would see income increase by more than 37% during the year the policy is in effect.
One point of criticism, however, is that the credit is only extended for one year. After 2021, the expanded credit will cease and families will see a smaller increase in their income unless further legislation is passed to continue or build on the new rules.
To see how much to expect, the personal finance website Grow has created a calculator that takes into account your application status, annual income, and the number of dependents you have.