Personal finance

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The IRS on Monday announced it has started sending letters to more than 36 million American families who may be eligible for the expanded child tax credit and monthly payments set to begin in July.

The maximum enhanced credit, which was established by the American Rescue Plan in March, is $3,600 for children younger than age 6 and $3,000 for those between 6 and 17 for 2021.

Half of the money will be sent to most families in monthly installments beginning July 15 and going through December – the payments are $300 per month for children younger than 6 and $250 per month for those aged 6 to 17. Families will get the remainder when they file their 2021 taxes next year.

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Letters from the IRS are going to families that may be eligible based on information they submitted to the agency on their 2020 federal income tax return, or 2019 return, if they have not yet filed for last year. The tax agency is also sending letters to those who used the non-filers tool to claim a 2020 economic impact payment and may also be eligible for the advanced child tax credit.

Families who are eligible to receive the credit and are up to date on their tax returns don’t have to take any action to start getting the monthly payments in July. Those that haven’t yet filed for 2019 or 2020 should make sure they submit their tax information to the IRS so that the agency can determine eligibility and send any payments they’re entitled to receive.

Most families – some 80%, according to the IRS – will get the money via direct deposit, like previous stimulus payments. Others will receive either paper checks or a debit card. In the coming months, the IRS will continue to offer tools and resources about the child tax credit, including a way for families to opt out of monthly payments and receive the credit in a lump sum when they file 2021 taxes.  

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