If you find an unexpected letter in your mailbox this week purportedly from the IRS offering you thousands of dollars in cash for a child tax credit, don’t panic, this isn’t a scam. In fact, you’ll want to hang onThese letters serve as receipts for the very real refundable tax credit that was passed as part of President Biden’s US bailout. Here’s what you need to know.
How much is the child tax credit and how is it different this year?
the child tax credit is tax relief of up to $ 3,600 per child for tax filers with dependent children, and 88% of families should be eligible for at least some money, according to the IRS (this Lifehacker post break it down for you in more detail). What makes the credit unique is that it is a refundable credit paid in advance, with half of the money sent in the form of regular checks on the 15th of each month, starting in July. and continuing until the end of the year (the remaining half of the credit will be claimed as part of your 2021 tax return).
What is this letter from the IRS about?
There is in fact of them letters sent to 36 million families: one that says “you may be eligible” for the child tax credit, and a second follow-up letter that provides an estimate of how much is actually owed to you. Note that it is possible to receive the first letter and finally do not eligible for the credit, as it’s prorated for those who exceed certain annual gross income (AGI) thresholds, based on your 2019 or 2020 tax return (to get an estimate of how much you can expect to get, use CNET’s calculator here). If your AGI is less than the following for the 2021 tax year, expect a full payment of $ 3,600 per child:
- Single: $ 75,000
- Head of family: $ 112,500
- Joint deposit: $ 150,000
It is important to note that these advance payments are based on what your AGI 2021 strength be, which is why the IRS is setting up a portal where you can report adjustments to your 2021 income or the status of your dependent children (such as the birth of a new child). It should be live by July 1 (in the meantime, keep an eye out for this IRS web page for more information on the portal, as soon as it becomes available).
What should I do with these letters?
Until you actually receive a check or direct deposit, you’ll want to keep both letters for record keeping purposes, especially the second, as it includes an estimate of how much you will actually receive. If this turns out to be less than what you are owed, you can use these letters as part of a clawback request when filing your 2021 taxes.
What if you haven’t received these letters? Well, the IRS just started sending them out less than a week ago, so they could be caught in the mail. Otherwise, you might want to confirm:
- That you are in fact eligible for the tax credit
- If the IRS has your most recent address on file
- Whether you actually filed a 2019 or 2020 return.