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Child tax credit stalled ahead of January payment

For the first time in six months, millions of families will not receive the monthly child tax credit that many began to rely on for support with child care, food, clothing and other essential goods and services.

The government funds being paid out under the American Rescue Plan had been deposited on the 15th of each month and would’ve been received January 14th since the following day is a Saturday. But the failure by Congress to pass the Build Back Better Plan means child tax credit payments are stalled for over 36 million families.

For households earning less than $150,000, the American Rescue Plan had increased the maximum tax credit amount from $2,000 per child to $3,600 for a child under age 6, and up to $3,000 for a child aged 6-17. It also allowed families to claim their 17-year-old children for the credit for the first time. The Child Tax Credit expansions are believed to have reduce annual child poverty by more than 40 percent as compared to child poverty before the plan. The passage of Build Back Better would have extended these tax credit increases for one year.

Failure to pass the bill means the maximum credit per child will decrease by $1,000 for school-age children and $1,600 for young children. According to AP News, full tax credit payments will now go only to families who earned enough income to owe taxes. This policy decision limits the benefits for the lowest earning households.

All families now getting the expanded Child Tax Credit will lose out, but the cut is largest for low-income children, according to the Center on Budget and Policy Issues (CBPI). The organization estimates 10 million children are at risk of falling into poverty without the tax credit.

Tax analysts advise families to look out for an IRS letter titled Letter 6419, which details the amount of child tax credit they received last year. The payments received up until now only represent half of what families were supposed to receive. To claim the other half, families must file a tax return even if their low income means they’re not required to. To access the other half of what could be owed, families will need to file a 1040 return and reconcile amounts already received with what’s owed to them. Some families whose income increased last year may not qualify for any more money now based on their income. But others will qualify for more money from the child tax credit.

And parents who welcomed a new baby in 2021 could be eligible for up to $5,000 in child tax credits during this filing season.

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