If you find an unexpected letter in your mailbox this week, purportedly from the IRS and offering you thousands of dollars in cash for a child tax credit, don’t panic—it’s not a scam. In fact, you’ll want to hold onto these letters as receipts for the very-real refundable tax credit that passed as part of President Biden’s America Rescue Plan. Here’s what you need to know.
What is the child tax credit worth and how is it different this year?
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The child tax credit is a tax break worth up to $3,600 per child for tax filers with dependent children, and 88% of families should qualify for at least some money, according to the IRS (this Lifehacker post breaks it down for you in more detail). What makes the credit unique is that it’s a refundable credit paid out in advance, with half of the money being sent as 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’s this IRS letter about?
There are actually two letters being sent to 36 million families: One that states “you might be eligible” for the child tax credit, and a second, follow-up letter that provides an estimate on how much you’re actually owed. Note that it’s possible to receive the first letter and ultimately not qualify for the credit, as the it is prorated for those who exceed certain annual gross income (AGI) thresholds, based on either 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, though, expect a full $3,600 payment per child:
- Single: $75,000
- Head of household: $112,500
- Married filing jointly: $150,000
Importantly, these advanced payments are based on what your 2021 AGI might be, which is why the IRS is setting up a portal where you will be able to report adjustments to your 2021 income or the status of your child dependents (like the birth of a new child). It’s expected to be online by July 1 (in the meantime, keep an eye on this IRS webpage for more information about the portal, as it becomes available).
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What should I do with these letters?
Until you actually receive a check or direct deposit, you’ll want to hold onto both letters for record-keeping purposes—especially the second, as it includes an estimate of how much money you’ll actually receive. If that turns out to be less than what you’re owed, you can use these letters as part of a recovery claim when filing your 2021 taxes.
And if you haven’t received these letters? Well, the IRS only just started sending them less than a week ago, so they could be caught up in the mail. Otherwise, you might want to confirm:
- That you’re actually eligible for the tax credit
- Whether the IRS has your most recent address on file
- That you’ve actually filed a 2019 or 2020 return.