The First Monthly Payments Under The Expanded Child Tax Credit Are Arriving
SACHA PFEIFFER, HOST:
If you have children under age 18, chances are you'll soon be getting some cash from the federal government. The first monthly payments under the expanded child tax credit are rolling out today to millions of families across the U.S.
For details on that, we have NPR's Andrea Hsu. Good morning, Andrea.
ANDREA HSU, BYLINE: Good morning.
PFEIFFER: And as a refresher, is this part of President Biden's American Rescue Plan, that law passed last spring that also provided the stimulus money and the larger-than-usual unemployment payments?
HSU: Yes, that's right. The bill included a one-year increase in the child tax credit. So it's $1,000 more per child for kids 6 and up and $1,600 more for kids under 6. But there are income limits. Once you hit a certain income, the amount goes down and eventually phases out. But it is a significant boost for tens of millions of families, and the White House is calling it historic.
PFEIFFER: Is this - another thing that potentially is confusing - they're called payments. But are they officially considered tax credits? Yes?
HSU: Yeah, it's a tax credit. But what's going out today to families is an advance payment of that tax credit. So in the past, you would get this as a one-time lump sum when you filed your taxes. Let's say you have a kid who's 8. Before this year, you would have gotten that $2,000 credit when you filed your taxes. Now more - now, though, it's more. It's up to 3,000, and you'll get half of that spread over the next six months and then the other half when you file your taxes next year. And even if you don't owe very much or anything in federal tax, you'll still get the full amount. That didn't use to be the case. Now, if you don't want the advance payments the next six months, you can opt out.
PFEIFFER: Now, when you say opt out, do you mean decline the money? And what would make people decline it, if that's the case?
HSU: Right. You would not be turning down the money. You're just delaying it until next year. So families might be used to getting this credit every April. So if you're getting a little bit every month now, you might be surprised at how little you get next year when you file your taxes. And here's another thing you might want to be aware of. If you have a child who's turning 18 this year, that child won't be eligible for the tax credit, but you may still get a payment for that child. So most families will end up having to pay that money back. And I should also say, if you have a baby this year, you'll be able to get the credit for that child. But you will have to update your status with the IRS.
PFEIFFER: In case people are wondering if they needed to fill out a form and can't remember if they did or overlooked it in the mail, do they have to? Will they still get the money if they didn't?
HSU: Yeah. For most people, you didn't have to do anything. The government already figured out how much you're getting based on your last tax return, and you'll get that payment by direct deposit or a check in the mail, the same way you got your tax return. Now, if you don't earn enough money to file taxes, the IRS has a website where you can go and register to get the monthly payments. But there is a concern that a number of families haven't yet signed up, and these are families who could really benefit. I talked to Aisha Nyandoro with the nonprofit Springboard to Opportunities. She's in Jackson, Miss.
AISHA NYANDORO: We are worried about that. But the piece that we are optimistic about is when these checks start hitting, that word of mouth will fill in the gap.
HSU: So what she means is someone might call their friend or neighbor and say, hey, I got this money today. Did you get it? And then if someone hasn't signed up, they may go and do so.
PFEIFFER: And, Andrea, we have to acknowledge that while for many progressives this is a major victory, it upsets people who think the government is giving away money wildly. How does the administration respond to that?
HSU: Well, the White House points to experts who have estimated that the expanded child tax credit is contributing to 5 million children being lifted out of poverty. This would be cutting child poverty in half. And they say this is money that families can spend on things like groceries or doctor's visits or school supplies, all things that will lessen stress for families and improve children's well-being. But remember, this is just for one year. President Biden wants to extend it, but he needs support in Congress, and it's unclear how that's going to pan out.
PFEIFFER: NPR's Andrea Hsu. Thank you.
HSU: Thank you, Sacha. Transcript provided by NPR, Copyright NPR.