First child tax credit payments have been sent. Here's what you need to know
(CNN) Tens of millions of families have been sent the first payment of the expanded child tax credit , the Internal Revenue Service and the Treasury Department said Wednesday night. The beefed-up credit will provide them with extra funds each month through the end of 2021 along with a tax break next year.
The payments were approved as part of the Democrats' $1.9 trillion stimulus package that President Joe Biden signed into law in March. The first installment totaled $15 billion.
The infusions may offer the greatest benefit to low-income families, cutting child poverty nearly in half -- but the extra cash will also go to better-off American families.
Here are four things you need to know about the expanded child tax credit:
The full enhanced credit will be available for heads of households earning $112,500 and joint filers making up to $150,000 a year, after which it begins to phase out.
For many families, the credit then plateaus at $2,000 per child and starts to phase out for single parents earning more than $200,000 or for married couples with incomes above $400,000.
Parents who aren't citizens can receive the payments for their citizen children as long as they have individual taxpayer identification numbers (ITIN) and their children have Social Security numbers.
How much will I get?
That depends on your household income and family size.
Eligible families can receive a total of up to $3,600 for each child under 6 and up to $3,000 for each one age 6 to 17 for 2021. That's an increase from the regular child tax credit of up to $2,000 for each child up to age 17.
When will I see the money?
They can claim the other half when they file their 2021 taxes next year.
Those who don't receive their monthly payments until later in the year will still get half the credit in 2021.
Families who want to receive the payment as a lump sum can opt out of the monthly installments at the IRS portal.
Some parents may not want to get the monthly payments, particularly if their incomes increase this year. The payments are credits toward families' tax liability for 2021 but are based on 2020 or 2019 income and household size. Some who get the advance credits could wind up receiving much smaller refunds -- or even owing taxes -- next spring when they complete their 2021 returns.
The IRS advises parents whose incomes or circumstances change during the year to update their information through the agency's portal later this summer, when it adds the functionality. The IRS can then adjust the monthly payments accordingly.
Lawmakers, however, protected lower-income parents from potential overpayments. Heads of households making $50,000 or less and joint filers with incomes of $60,000 or less will not need to repay any excess payments.
Do I have to do anything to get it?
The vast majority of families -- roughly 39 million households covering 88% of children -- will get the credit automatically because they have filed 2019 or 2020 returns claiming the credit.
More than 35 million families were already sent the payments, while about a million have opted to take the funds as a lump sum, an administration official said Wednesday. The others have filed for extensions or have issues with their returns.
Parents of nearly 60 million children will receive the monthly payments through direct deposit, paper checks or debit cards, according to the agency. Some 86% of payments will be sent via direct deposit.
Families containing more than 720,000 children who signed up for stimulus checks last year will receive the child tax credit payments, Treasury estimates.
In early August, the IRS is scheduled to allow parents to update their mailing address, and later in the summer, the agency will let families update their income and marital status, as well as the number of dependents, which is important for anyone with babies born in 2021.
This story has been updated with additional information.