A final money explosion is expected to arrive on Dec. 15 for about 36 million families nationwide – including about 1 million families in Michigan – who are eligible for the early payment of the child tax credit.
But what happens in January?
The money will stop unless Congress passes President Joe Biden’s Build Back Better program on social spending and the climate. And at the moment, since mid-December, the economic package has stalled in the Senate.
Families may see another round of direct payments in 2022, some experts say, but many say the money is unlikely to show up in a month from now.
Don’t bet on january
“Right now, no one should expect a payment on Jan. 15,” said Matt Hetherwick, director of individual tax programs for the nonprofit. Accounting assistance company in Detroit.
Monthly payments, which started on July 15, were limited to 2021 and the last is set for December 15.
The changes to the child tax credit are part of the US bailout, which was enacted on March 11. The Build Back Better package on October 28 released calls to extend monthly advance payments by one year until 2022.
While the Build Back Better version passed by the House would still extend advance payments until next year, the bill has yet to be passed by the Senate.
And we are talking more and more about the fact that the economic package risks further delays and that the debate could last until 2022.
Mark Luscombe, senior analyst for Wolters Kluwer Tax & Accounting, agreed families should not expect any early payments in mid-January.
“It is possible that, if Congress ultimately passes the bill with the current prepayment provision, the Jan. 15 payment will be late once the IRS has the authority of Congress to issue the payment,” Luscombe said.
Best bet: Don’t plan to dip into the child tax credit money to cover the big bills for the next month.
Plan for ways to cut expenses
Not seeing an extra $ 430 per month on average could be shocking to many families who are using this new money to pay rent, pay for the car, cover unforeseen emergencies and, yes, deal with rapidly rising home prices. food, gas and home heating. .
Advance monthly payments are up to $ 300 for each child aged 5 and under and up to $ 250 for those aged 6 to 17.
Thus, some eligible families received up to $ 900 per month for three young children.
Six months of prepayments has made a big difference to everyone’s budget – giving middle-income families who face one bill after another when raising children, wiggle room and relieving struggling families during the day. pandemic.
Additional money in December will be welcome
December’s money is key for many, given higher utility bills, higher prices due to inflation, and additional vacation spending.
“I pray for it, trust me,” said Sharon Bayn, 63, noting that she wanted to see a check in the mail for her upcoming Dec. 15 payment.
Bayn, who lives in southwest Detroit, didn’t start receiving money until October after receiving free help from the Accounting Aid Society to complete his tax returns.
Bayn has the guardianship of her 15-year-old grandson, Ronald Bayn, a freshman at Western International High School in Detroit. She wasn’t sure why she hadn’t received any of the advance payments once they started to be sent by check or direct deposit in July.
Then, on a hot August day, two women from the Congress of Nonprofit Communities went door-to-door in the Bayn neighborhood to spread the word to families who qualify for advance payments but could. to lack.
They spoke to Bayn over the fence of his house, handed him brochures, and told him where to call for help.
Bayn had not filed tax returns for years because she was not required to do so due to her low income. Yet that’s exactly why she didn’t end up receiving the monthly advance payments automatically, like millions of other families.
After talking to Accounting Aid and filing her income tax returns, Bayn received $ 500 for the advance child tax credit in October and she received an additional $ 500 in November, making up for the three months she didn’t. received nothing. Otherwise, she would have received $ 250 per month for her grandson as of July.
Bayn lives on a limited income, including $ 740 per month in Social Security benefits and a pension of $ 90 per month which her husband, who died in 1988, earned while at McLouth Steel.
She was able to pay bills, buy clothes for her grandson for high school and use some of last month’s money to fix the family van when the brakes collapsed.
“The money is coming… convenient,” she said.
Bayn, who receives monthly food aid from the SNAP government, said the extra money from the loan had also helped her cope with the rising cost of food. SNAP benefits, which increased in October, typically do not cover the full amount of a household’s grocery bill.
The Detroit grandmother said she was now paying $ 3.49 a pound for a burger, buying in bulk, down from around $ 2.99 about a year ago. And bread has increased where she shops, she said, from about 89 cents to $ 1.10 a bread.
Inflation hit a 39-year high as consumer prices jumped 6.8% for the 12 months ending in November.
Once the December check arrives, Bayn plans to buy Christmas presents for his grandson.
“Ronald is having a good Christmas.”
As for January, Bayn knows things are uncertain now when it comes to the expanded child tax credit.
She doesn’t expect to receive any money next year, but she plans to file a tax return in 2021 for the amount owed for the child tax credit.
Prepayments are expected to be half of what someone would qualify to receive. (The IRS reconciled prepayments based on 2019 or 2020 tax returns.)
Bayn said she hoped – but was not dependent – on continuing the monthly advance payments for the credit.
“If he comes in, it’s a blessing to me,” she said.
The child tax credit is currently not limited to low-income people, but it was designed in part to help lift children out of poverty.
Detroit Mayor Mike Duggan called the money a “one-stop-shop” for families in June, as efforts developed in the region to ensure that the child tax credit expanded, complicated and potentially confusing, would reach the families who needed it most.
The main changes to credit included increasing the benefit, expanding access to reach children from lower-income families, and providing advance payments in monthly installments to those who qualify. Families are eligible even if they generally do not file an income tax return or have little or no income. The child must have a social security number. (But under the current Build Back Better bill that was passed by the House, Luscombe noted, the social security number requirement would be dropped.)
Don’t forget the child tax credit at tax time
Families must file the 2021 income tax return next year in order to claim the second half of the child tax credit to which they are entitled.
If you’ve received child tax credit money this year, pay attention to important paperwork next month.
In January, you need to keep an eye out for a letter from the IRS – officially dubbed “Letter 6419” – that will state how much money you received for child tax credit advance payments in 2021.
Keep this letter and file it with other important tax documents.
If you think the number on the letter isn’t correct, Luscombe says, the taxpayer will want to go to the Child Tax Credit Update Portal on irs.gov. “
You can then check the information on this site to find out what the IRS says has been paid. Possible reasons for the differences, he said, could be prepayments made to another bank account or a lost check in the mail.
“If after checking the portal, the taxpayer still believes the letter 6419 is in error, then they could contact the IRS,” Luscombe said.
What if you haven’t received money in advance in 2021?
Even more important is filing a 2021 income tax return for families who would qualify for the child tax credit but did not receive any advance payments this year.
It is possible, if you are eligible, that you will receive a lump sum payment by claiming the child tax credit when you file a federal income tax return for 2021.
This is an important point, especially for low-income or families with no income who normally do not earn enough money to be required to file a federal income tax return.
What if you received the wrong amount?
Again, this is something that can be resolved when you file the 2021 tax return next year.
“If the taxpayer feels he should have received more or less advance payments than he actually received,” said Luscombe, “the taxpayer can solve this problem by calculating the correct child tax credit on the 2021 tax return to reflect the advance payments that were actually received and adjust for the difference. ”
We will probably hear more about the child tax credit and the possibility that parents may receive advance payments next year.
But again, experts say they wouldn’t bet to see more money as early as mid-January.