If you find an unexpected letter in your mailbox this week that purportedly came from the IRS offering you thousands of dollars in cash for a child tax credit, don’t panic – it’s not a scam. In fact, you should keep these letters as a receipt for the very real refundable tax credit that was passed as part of President Biden’s America bailout plan. Here’s what you need to know.
What is the child tax credit worth and how is it different this year?
The Child tax deduction is a tax break worth up to $ 3,600 per child for taxpayers with dependent children, and 88% of families should qualify for at least some cash, according to the IRS (this Lifehacker post break it down for you). The special thing about the loan is that it is a repayable loan that is paid out in advance, with half of the money being regularly on the 15th of each month, starting in July and through to the end of the year (the remaining half of the credit becomes as part of your 2021 tax return).
What is this IRS letter about?
In fact, two letters are sent to 36 million families: one saying you may be eligible for the child tax credit and a second follow-up letter giving an estimate of how much you are actually owed. Note that it is possible to receive the first letter and ultimately not qualify for the credit as it will be prorated for those who exceed certain thresholds of gross annual income (AGI) based on your 2019 or 2020 tax return (to get an estimate of.) how much to expect, use CNET’s calculator Here). However, if your AGI for the 2021 tax year is less than the following, expect a full payment of $ 3,600 per child:
- Single: $ 75,000
- Head of Household: $ 112,500
- Marriage together: $ 150,000
It is important that these prepayments are based on your AGI 2021. For this reason, the IRS is setting up a portal where you can make adjustments to your 2021 income or the status of your dependent children (such as the birth of a new child). It is expected to be online on July 1st (in the meantime, keep an eye on that) IRS website for more information on the portal as soon as it becomes available).
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What should I do with these letters?
Until you actually receive a check or a direct deposit, be sure to keep both letters for documentation purposes – especially the second, as it contains an estimate of how much money you will actually receive. If this turns out to be less than your due, you can use these letters as part of a recovery claim when you file your taxes for 2021.
What if you haven’t received these letters? Well, the IRS only started sending them out less than a week ago so they could be caught in the mail. Otherwise, you may want to confirm the following:
- You actually are entitled for the tax credit
- Does the IRS have your newest address?
- That you actually filed a statement for 2019 or 2020.
