Parents should be on the lookout this week for a letter from the IRS regarding their eligibility for monthly payments from the expanded Child Tax Credit.
The agency announced in a press release Monday that it has begun sending out letters to more than 36 million American families who may be eligible to receive monthly payments starting in July. Eligibility for the 2021 Child Tax Credit (CTC) advanced payments is determined by the information provided in your 2020 tax return, or your 2019 return if this year's return has not yet been processed.
This year's Child Tax Credit was expanded under the American Rescue Plan passed in March. It will provide families up to $3,600 per child under the age of 6 and $3,000 for all other children under 18, with half of the credit being paid out in monthly installments between July 15 and December 15.
The letter is simply to notify parents who may qualify about the increased amount. It also explains the removal of the minimum income requirements — meaning families who don't owe any federal income taxes will still be able to receive the full payments — and the maximum amount of money you can make to qualify for the entire benefit.
Parents who qualify for the tax credit will automatically start receiving monthly payments in July of up to $300 per child. But if you would rather receive the money as a lump sum come tax season next year, rather than as a monthly benefit, the letter says that instructions for doing so will come at the end of the month. There is no penalty for opting out.
If do you want to receive the monthly payments, then the letter explicitly states that you don't need to take any further action.
While this letter is legitimate, scammers claiming to be with the IRS or an organization that supposedly helps families access the money are likely to start popping up in the upcoming months as the CTC portals launch and checks begin being sent out, so it's important to be vigilant.
The IRS will never ask you to provide any personal information like your Social Security number or make payments through the mail, via email or over the phone. The only reason you will ever be contacted over the phone by the IRS is if you owe back taxes or if they field audit you; but even if that is the case, you will be notified via the mail first and will not be asked for any sensitive information.
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