Over the last week and a half, many Americans received a letter from the IRS about the Child Tax Credit, which may have looked like a scam at first glance. In actuality, the letter could be worth thousands of dollars if you save it for tax purposes. According to a report by Life Hacker, there is no reason to panic.
The Child Tax Credit is a part of President Joe Biden's American Rescue Plan. It's a tax break for taxpayers with dependent children in 2021. It's a unique offer, and because of the way it is being distributed receiving the letter does not necessarily guarantee that you will qualify for the credit. Still, it's worth saving for further inspection next spring because it could be worth up to $3,600 per child.
The Child Tax Credit is a refundable credit paid out in advance. Half of the money will be sent on the 15th of each month starting in July and continuing to the end of 2021. The rest can be claimed as a part of your 2021 tax return in 2022.
The IRS is estimating Americans' eligibility for this credit based on their 2019 and 2020 tax data, but eligibility will be determined for sure by our 2021 annual gross income (AGI). Therefore, you may have received two letters: one saying that "you might be eligible" for the credit and another estimating how much you're owed from the program.
The second letter makes it more likely that you will qualify for the credit. The Child Tax Credit will be available to parents who file their taxes as "single" with an AGI of up to $75,000, and married couples who file jointly with an AGI of up to $150,000. Those who file as "head of household" can claim the credit with an AGI of $112,500 or less.
As exciting as this prospect is, for now there's not much to besides wait for your eligibility to be determined. You should save the letter(s) you've received for your 2021 tax filings, or in case you need to claim more money than you end up receiving.
You can also visit the IRS website here to read more about Child Tax Credit eligibility, and to enter your information for more info on your status. It may also be a good time to update your mailing address and direct deposit information with the IRS. Child Tax Credit payments will start going out on July 15.