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Millions of parents across the U.S. can expect to receive some extra cash this week, when the IRS will start distributing the fourth round of payments from the newly expanded child tax credit.
The IRS is expected to deliver the monthly installment – worth about $15 billion – to families beginning on Oct. 15, part of a program authorized as part of the stimulus bill that Democrats passed without any Republican votes in March.
The majority of the payments, worth up to $300 per child, will be issued by direct deposit.
Under the expanded credit, low- and middle-income parents can expect to receive $3,000 for every child ages 6 to 17 and $3,600 for every child under age 6. The payments are income-based and begin to phase out for individuals earning more than $75,000 and married couples earning more than $150,000. The tax credit is tapered by $50 for every $1,000 a family makes over the income thresholds.
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If families earn too much to qualify for the sweetened tax credits, they can still receive the $2,000 credit for their children if their income level is below $200,000 for individuals and $400,000 for married couples.
There’s no limit on the number of children who can receive the credit per family.
The IRS is distributing half of the credit as an advance on 2021 taxes in six monthly installments, worth $250 to $300 per child. The remainder will come when parents file their 2021 tax returns next April.
If families would prefer to receive a lump-sum payment when they file their tax return in 2022, they can use this new tool unveiled by the IRS earlier this eyar.
Parents who have provided the IRS with their bank account information in order to receive a tax refund will receive the payment via direct deposit. Otherwise, parents can expect to receive the money as a paper check.
Families also can check the Child Tax Credit Update Portal to see how the money will arrive. They can also sign up for direct deposit or change their bank account through the portal.
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The government began paying out half of the credit on July 15. From there, the IRS will deliver the monthly payments on the 15th of each month through December 2021. It has already issued three installments.
There are three more payment dates this year:
- Oct. 15
- Nov. 15
- Dec. 15
The remaining half will be a credit toward next year's taxes. Any money left after covering taxes will be paid directly to families.
Some families may want to stop the monthly payments, some financial experts say, because the enhanced credit is based on tax returns from 2019 and 2020. That means families that are earning more money in 2021 should be aware that if they are overpaid by the IRS, they will have to return that money next April during tax season.
To stop the advanced payments, families must use drop out using the IRS's new online portal three days before the first Thursday of the next month, according to the agency.
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The deadline to opt out of the fourth round of payments has already passed, but families can still drop out of future payments using the IRS's new online portal. The opt-out date for the November payment is Nov. 1, and the op-out date for the December payment is Nov. 29.
For parents who are married and filing jointly, both spouses must opt out of the payments. If families miss the deadline to unenroll, they will receive the monthly payment until the IRS processes their request.
The boosted tax credit is poised to end in 2021, although President Biden and Democratic lawmakers are pushing to extend it for at least five years as part of a sweeping spending package that would dramatically expand the social safety net.
It's unclear whether they will be successful.
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