In previous years, the credit was $2,000 per child under age 17 but this figure has grown substantially this year. The increased payments, established by the American Rescue Plan Act, will reach up to $3,000 per child between the ages of 6 and 17 and $3,600 per child under the age of 6.
This year, there are no limits on the amount of credit you could receive based on income. Even families with no income will be getting the full credit in 2021, unlike previous years.
The amount of credit available to each family is related to their income and financial situation. As such, some families may only benefit from the old credit amount of $2000 per child if they exceed a certain annual income figure.
The IRS will send the payments by direct deposit, using the banking information from your most recent tax season. The payments can only be sent to a single bank account and cannot be split across several accounts.
Those who have no set up their banking information for direct deposit will receive a check instead. However, this could incur some additional delay in receiving the payment.
For the most part, payments will be made on the 15th of each month from July to December 2021. The one exception would be the month of August were payments are sent out on the 13th. The remaining credit will be paid out after filing your tax returns for 2021.
Since these payments are being made in advance, there is a chance that some of it should be returned to the IRS. For example, if one of your children turns 18 then you could owe money to the IRS and should pay them back next tax season. The option to unenroll in the advance payments is also available for those who would like to do so. This can be done by opting out using the IRS’s online portal.
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