The Internal Revenue Service will send the payments on the 15th of the month, unless it falls on a holiday or weekend, through December. Eligible parents will receive $300 a month for each child under age 6 and $250 for each one ages 6 to 17.
Meanwhile, the IRS will also launch a separate portal to allow parents to update their address, bank account information and family size, as well as opt out of the monthly payments in favor of receiving the tax credit as a lump sum next year when they file their return.
More details about the portals will be announced in coming weeks, a senior administration official said. The administration also plans to launch an outreach campaign to inform families about the enhanced payments and the portals.
A bigger boost for one year
Under the American Rescue Plan, families can receive a credit totaling $3,600 for each child under 6 and $3,000 for each one under age 18 for 2021. This is up from the current credit of up to $2,000 per child under age 17. The enhanced portion of the credit will be available for single parents with annual incomes up to $75,000, heads of households earning $112,500 and joint filers making up to $150,000 a year.
The package also makes the tax credit fully refundable so that more low-income parents can take advantage of it. Until now, it has only been partially refundable — leaving more than 20 million children unable to get the full credit because their families’ incomes are too low.
Lawmakers also wanted to make it easier for parents to use the funds to cover their expenses during the year. So the law calls for sending families half the credit on a monthly basis, from July through December. They will then claim the other half on their 2021 tax returns.
The provision is projected to cost roughly $110 billion a year.