More than 36 million families are receiving letters from the Internal Revenue Service about receiving monthly Child Tax Credit payments from July through December.
The American Rescue Plan made key but temporary changes to the tax credit, such as offering more money to those who qualify and making the credit available for qualifying children who turn age 17 in 2021.
Another important change: Families can start getting money soon — instead of waiting until later next year. Many taxpayers would be able to receive half of their estimated 2021 Child Tax Credit in monthly installments for the rest of this year.
The IRS said the letters are going to families who may be eligible based on information they included in either their 2019 or 2020 federal income tax return.
The letters also would go to those who used the non-filers tool on IRS.gov in 2020 to register for an Economic Impact Payment.
A second letter is going to be sent in the future to eligible families to spell out a specific estimated dollar amount of their monthly payment, which begins July 15.
Be warned, though, if you like a big tax refund at once, you'll need to take action to avoid the monthly payments. Receiving a monthly payment will cut into how much you might receive as a lump sum tax refund when you file your 2021 federal income tax return.
The IRS plans to roll out a special tool that would allow families to opt out of the monthly payments. If you choose to opt out of the advance payments, you'd instead receive the full amount of the credit when filing a 2021 return next year, if you qualify.
