The Expanded Child Tax Credit Is Here. Here's What You Need To Know

If you have children under the age of 18, chances are good you'll be getting some cash from the federal government this week. In fact, check your bank account — the money might already be there.

The White House says $15 billion in payments have been sent out to the families of nearly 60 million children as part of the expanded child tax credit. Families will receive the funds by direct deposit or check. How much you get will depend on income and number of eligible children.

It's a huge undertaking by the IRS. The White House is describing the one-year expansion as historic relief to the largest number of working families ever. The changes are expected to cost over $100 billion.

Here are some key facts about how it works.

How much will my family get?

For every child under the age of 6, families will get up to $3,600 under the expansion, or $300 per month. For every child ages 6-17, the amount is $3,000, or $250 per month. This is a significant increase from past years when the credit was $2,000 per child, ages 0-16.

The amount starts phasing out for families with higher incomes, above $150,000 for married couples filing jointly, or $112,500 for single parents who file as head of household. There are a number of online calculators you can use to see how much you can expect to get.

Why is this money going out now?

What's being sent out this week is known as an advance child tax credit payment. In the past, families eligible for the child tax credit would have gotten it as a one-time lump sum when they filed their taxes. Now, half of the credit will be disbursed over six months, with a payment made on or around the 15th of every month from now until December. You get the second half of the credit when you file your taxes.

Do I need to sign up to get the money?

If you file federal taxes, you should automatically get the monthly payments. If you don't file taxes, you need to register on a website set up by the IRS. People who don't file taxes but received stimulus checks in the pandemic should automatically receive the payments.

"Families would be smart to confirm the account that the IRS has on file for them, and any other particulars that would be necessary to receive the credit," says Tim Flacke, executive director of Commonwealth, a social impact nonprofit. Those particulars include your most up-to-date bank account information and mailing address.

Can I opt out of the advance payments and just get the whole credit next spring when I file my taxes?

Yes. The IRS has created a website where you can manage your payments. You need to set up an account and verify your identity before you can stop the monthly payments.

By opting out, you are not turning down the credit. You are just delaying when you get it. This may be a good option for people who are accustomed to getting a sizable credit on their tax bill in the spring and count on that to offset taxes due or to make a big purchase.

What if my child turns 18 in 2021? What if I have a new baby this fall?

The expanded child tax credit covers children from birth to 17. If your child turns 18 in 2021, he or she will no longer be eligible. However, because the advance payments are based on earlier tax filings, you may still receive money for a child who is ineligible. Most people will have to pay that money back. The IRS does have a repayment protection program for lower-income earners.

If you have a baby anytime in 2021, that baby is eligible for the credit. The IRS says you will be able to make changes to your dependents, marital status and income on its website by late summer.

This has been talked about as the most substantial one-year reduction in child poverty in history. Is that true?

Columbia University's Center on Poverty and Social Policy estimated that the expanded child tax credit and other measures in the American Rescue Plan could lift 5 million children out of poverty, cutting child poverty in half in the U.S. That's not only because the amount of the credit is higher this year; it's also because in the past, families who earned very little were not eligible for the full amount.

The Treasury Department estimates that 26 million children in low-income families who would have received less than the full credit under the previous rules will now get the full, expanded credit.

But for this to happen, families who aren't already registered with the IRS need to do so, and there is concern that many have not. Children need a Social Security number to be eligible, and so families with mixed immigration status may be hesitant to register, says Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality.

Some families may also mistakenly believe that signing up for the advance monthly payments will make them ineligible for other government programs, says Aisha Nyandoro, CEO of the nonprofit Springboard to Opportunities in Jackson, Miss.

Her organization will be going door to door in the coming days to check on whether families have received the payments. She's also hoping word of mouth will help fill the gaps.

"Somebody calls their friend, or calls their family member or neighbor and says, hey did you get your check?" Nyandoro says.

What happens after this year?

The expanded child tax credit is only for 2021. A budget deal announced by the Senate Budget Committee on Tuesday would extend it. President Biden has also proposed an extension under his American Families Plan but faces opposition in Congress. Not a single Republican voted for the American Rescue Plan, and some have criticized the expanded child tax credit.

In an op-ed in the National Review, Sen. Marco Rubio of Florida called it corrosive. "There is substantially more to lifting families out of poverty than government-provided income," he wrote in February.

Meanwhile, supporters are hoping a smooth rollout will convince those on the fence of the value of the expanded credit.

"What I am hopeful for is that the power and the magnitude of what these checks mean for so many Americans is going to force the hand of politicians to make this permanent," Nyandoro says.

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