How some families can get stimulus checks worth up to $3,200 in backpay through Biden’s child tax credit rollout

A youngster wearing a mask looks at the camera while sitting on his father's shoulder in Central Park on May 24, 2020 in New York City.
The first expanded child tax credit checks will be sent out to families on July 15.

  • This week, the parents of about 60 million American kids will receive their first monthly child tax credit payment.
  • The new policy offers an opportunity for eligible parents and non-parents to get stimulus payments they missed.
  • These individuals would be eligible for all three stimulus checks, amounting to $3,200 in federal relief.
  • See more stories on Insider’s business page.

This week, the parents of about 60 million American kids will receive their first monthly child tax credit payment under Democrats’ expansion of the program.

But the new policy also offers an opportunity for parents and non-parents to receive pandemic stimulus payments they were eligible for but missed out. These individuals would be eligible for all three stimulus checks, amounting to $3,200 in federal relief. Senior administration officials confirmed it in a call with reporters on Wednesday evening.

The expanded child tax credit is significant in part because parents with no tax obligations are able to tap into the benefit. It previously excluded families who didn’t earn enough to file taxes, thus cutting out many of the country’s poorest parents. This is also the first time the government has delivered the child benefit through monthly checks, rather than a lump sum collected annually. The payments will stretch from July to December.

Most parents eligible for the child tax credit will automatically receive their monthly payments via direct deposit or a check in the mail. But non-tax filers must sign up for the payments through a new online portal specifically geared to enroll people generally outside the tax system.

Those who haven’t filed taxes for the last two years, but are eligible for the tax credit and stimulus checks could receive a windfall if they sign up for stimulus checks on a new online portal the government has created. Senior administration officials described it as another way to encourage people to sign up for federal aid they’re already eligible for.

In addition, for parents who sign up for the child tax credit before the end of the year, they’ll receive all of the monthly payments back to July.

“If you don’t sign up until September, October because you’re not aware, you’ll get those back-payments,” Christopher Wimer, the co-director of Columbia University’s Center on Poverty and Social Policy, told Insider. “If you were eligible for those one-time stimulus payments in one of the prior recovery bills and you signed up for the child tax credit, you would get those back payments as well when you sign up.”

Kris Cox, deputy director of federal tax policy at the left-leaning Center on Budget and Policy Priorities, said the additional checks for non-filers would further support some of the country’s most vulnerable kids.

“For families who have not claimed their [economic impact payments], that’s an additional, substantial amount of money that can really make a difference in the lives of their children,” Cox told Insider.

Still, some experts and community groups have raised concern that the sign-up portal for nonfilers has been inaccessible and overly complex. For example, it’s only available in English and it can’t be used on a smartphone. The poorest Americans are also less likely to own a desktop computer or laptop.

“The IRS’s special portal is designed pretty sh–ty,” Samuel Hammond, a welfare policy expert at the right-leaning Niskanen Center, said in an interview. “Over half the country doesn’t regularly file federal income taxes, especially at the very low income level. They may never have needed to file income taxes and there’s a huge knowledge gap.”

Experts say that between four and eight million children will miss out on the payments because their parents may struggle to use the portal or don’t know about the policy. Matt Bruenig, policy expert at the left-leaning People’s Policy Project, estimated around 6.6 million kids could be excluded from the benefit.

Senior administration officials told reporters they’ll continue trying to fix those issues and, along with enlisting advocates who can directly help people sign up for the child allowance. They argued while more accessible technology would be helpful, these individuals need direct help from advocates to walk them through the process.

Couples who earn $150,000 or less – and single, unmarried parents who make up to $112,500 – are eligible for the full $300 monthly checks for kids under 6 years old and $250 monthly checks for kids between 6-17 years old. The payments, which will benefit about 88% of American kids, begin to phase out for families with more than $150,000 in income.

The expanded child tax credit, part of Democrats’ $1.9 trillion American Rescue Plan passed last March, is a major expansion of the social safety net that experts are comparing to Social Security in its scale and scope. Wimer and his colleagues at Columbia have estimated that the enhanced child tax credit could cut child poverty by more than half.

“If this were to remain permanent, the only sort of analogous policy or program that we have been able to compare it to would be Social Society for the aged,” Wimer said. “This would be equivalent to that for children, essentially saying that children in America should not be poor, and that would be a major change in social policy for families with children and something that we’ve not done before.”

But the impact of the child tax credit will be muted if millions of Americans who haven’t filed taxes don’t apply for the payments. Raising awareness about the new program and helping parents apply are major challenges for the government.

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The government is sending up to $300 monthly checks to families with kids starting today. Democrats want to make it permanent as a new form of Social Security.

Joe Biden Chuck Schumer
President Joe Biden and Senate Majority Leader Chuck Schumer.

  • The US government is poised to send the first batch of child tax credit payments on Thursday.
  • Policymakers estimate 35.2 million families could see cash deposited into their bank accounts.
  • The success of the program will determine whether Democrats can extend it as another form of Social Security.
  • See more stories on Insider’s business page.

America’s neglected social safety net could be getting its largest patch in a generation on Thursday, when the US begins a year-long experiment providing a guaranteed income for families with children. Its success will determine whether it becomes a permanent fixture.

The Internal Revenue Service is poised to send the first batch of monthly child tax credit payments stemming from President Joe Biden’s stimulus law, which was approved in March over united Republican opposition. For six months, families can get a $300 monthly benefit per child age 5 and under, amounting to $3,600 this year. The measure provides $250 each month per kid age 6 and 17, totaling $3,000. Half of the benefit will come as a tax refund.

If all goes to plan, the federal government will deposit cash directly into the bank accounts of 36.2 million families, according to projections from administration officials shared with reporters on Wednesday evening. That represents the bulk of the 39 million families the IRS has identified as being eligible for the child allowance.

Experts say the one-year child tax credit payments could shift public attitudes on cash benefits given its wide reach and mark a big step forward in slashing child poverty – some estimate it could be cut by up to half.

“It’s hard to understate the significance of this expansion for child poverty in America,” Samuel Hammond, a welfare policy expert at the center-right Niskanen Center, told Insider. “Most countries have some form of child or family allowance – and the US has been an outlier in excluding the lowest income households from our version of a child benefit,” he said, adding “once you start on this path, it’s hard to turn back.”

Some Democrats are already drawing comparisons between the program and the birth of Social Security in 1935, a milestone that set up a critical source of income for retired and disabled Americans.

“It’s the most transformative policy coming out of Washington since the days of FDR,” Sen. Cory Booker of New Jersey recently told The New York Times.

‘Some bumps in the road’

Michael Bennet Capitol Hill
Sen. Michael Bennet (D-CO), arrives for a vote in the Capitol.

Democratic lawmakers and Congressional aides have labored behind the scenes to ensure a smooth rollout of the payments. The child tax credit was revamped to include low-income families not required to file taxes, a group previously shut out from tapping into the benefit.

There were some signs of problems early on. Some experts and community groups raised concern that an IRS portal to sign up the poorest families was too complex and inaccessible for people who lacked desktop computers.

Sen. Michael Bennet of Colorado, an architect of the measure, said on Monday the IRS has given the child tax credit “100% of their attention” and said he’s regularly communicated with the agency.

Still, he cautioned there could still be some snags. The pandemic has added to the IRS’s responsibilities over the past year and strained its depleted staff. It has gone from being a tax-collecting agency to a benefit distributor on par with the Social Security Administration.

“I’m sure there will be some bumps in the road as there always are when rolling out something new like this,” he told reporters. “But it’s important as bumps arise to iron them out.”

Some of those potential problems, Bennet told Insider, include “people not getting the benefit they were supposed to receive and accounting issues that might arise. I hope they won’t be systemic issues, I don’t think they will be.”

The IRS has struggled sorting through a massive backlog of tax returns in recent months, delaying tax refunds in at least some cases. Hammond said it was unclear whether distributing monthly child benefits via the IRS is “sustainable in the long run.”

“We’ve increasingly asked the IRS to do an awful lot of social policy beyond taxing and collecting revenues, and the IRS is just not equipped to be a benefits administrator,” he said.

The future of Biden’s child allowance

joe biden
President Joe Biden makes brief remarks at the White House.

The bulked-up child tax credit is a rare measure that enjoys deep support among both House and Senate Democrats. Bennet, Sen. Sherrod Brown of Ohio, and Reps. Rosa DeLauro of Connecticut and Suzan DelBene of Washington, are among the lawmakers spearheading efforts to make it permanent.

Biden proposed in his spending plans to extend the bulked-up benefit until 2025, the same year that Trump-era tax cuts for individuals end. It’s possible Republicans could trade support to renew the pair of benefits, given the GOP is generally opposed to cash aid as a standalone measure.

“I think we should embrace allowing people to keep more of their own money, if we’re applying it towards their payroll tax,” Sen. Marco Rubio of Florida told Insider last month. Rubio and Sen. Mike Lee of Utah led efforts to double the size of the child tax credit in the 2017 Republican tax law. The pair favor boosting the benefit amount for workers.

On Wednesday, Rubio released a statement tearing into the child allowance. “The way President Biden tells it, the handout is part of his administration’s ‘pro-family’ plan,” he said. In reality, he has transformed the pro-worker, pro-family Child Tax Credit into an anti-work welfare check.”

Senate Democrats are kicking off a flurry of negotiations to finalize what measures will ultimately be included in a $3.5 trillion budget deal that would mostly be paid for with tax increases. They’ll advance it in a pathway known as reconciliation, which allows them to approve certain bills with a simple majority instead of a filibuster-proof 60 votes. Every Democrat must stick together for the budget package to clear the Senate.

Brown, the Banking Committee chairman, said talks were in their early stages so no child allowance expiration date was set. “Not clear what year yet, but it’s going to be a popular program like Social Security,” he told Insider on Wednesday. “Republicans will not only be afraid to take it away, they’ll start taking credit for it.”

He also suggested its hefty price tag could keep a permanent extension out: “I think its so costly it may not [be included], but I’m still fighting for permanence,” he said.

Brown also rejected the notion of changing the income thresholds. “I think that’s pretty locked in. We’ve all been talking about how important that is, 90% of the public getting this is really consequential and key to its popularity,” he told Insider.

Some Democratic moderates may balk at renewing the child tax credit in its current state. Sen. Joe Manchin of West Virginia, a swing vote, told Insider he was open to a permanent extension last month. Others are undecided on the program’s fate.

“I consider it not an easy issue,” Sen. Angus King of Maine, an independent who caucuses with Democrats, said in an interview. “It is a major expansion of what amounts to an entitlement program. I certainly supported it as part of the pandemic relief package. But supporting it on a permanent basis is something that I have to have more data on and understand how it’ll be paid for.”

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Joe Manchin appears close to making up his mind. Here’s what he wants in an infrastructure plan.

Joe Manchin
Sen. Joe Manchin (D-WV).

  • Joe Manchin holds singular sway over Biden’s economic agenda and his spending plans.
  • Over the past few months he has held back from offering policy specifics, but that’s changing.
  • He’s indicated he wants an infrastructure plan that includes a partial rollback of Trump’s tax cuts.
  • See more stories on Insider’s business page.

Sen. Joe Manchin of West Virginia is poised to play a critical role in President Joe Biden’s economic agenda.

The influential Democratic centrist nearly derailed passage of the $1.9 trillion coronavirus relief package when he pressed for a last-minute cut to federal unemployment benefits. It sent Democrats scrambling to secure his support for 12 hours – they eventually agreed to a reduction.

With Democrats essentially needing to pass major legislation via reconciliation – which requires all 50 members of the parties to vote in favor – Manchin remains the swing vote on infrastructure.

Manchin now holds major sway in ongoing bipartisan infrastructure negotiations. He’s pushing both parties to strike a deal over the objection of fellow Democrats and progressives who view the talks as alternately a waste of time or something that could produce a significantly watered-down bill.

On Tuesday, Manchin opened the door to a Democrat-only package. He’s largely held back from offering policy specifics, but here’s an overview of what Manchin seeks from a new economic spending bill:

  • An increase of the corporate tax rate to 25% from 21%.
  • Boosting nuclear and hydrogen energy, along with carbon capture technology.
  • Some social initiatives from Biden’s “human infrastructure” plan.
  • Up to $4 trillion in infrastructure spending.
  • A slew of new taxes to finance it.

On Tuesday, Manchin offered some of his clearest rationale yet behind why he wants to raise corporate taxes in an interview with NBC News:

“Republicans have drawn a line in the sand on not changing anything, and I thought the 2017 tax bill was a very unfair bill, and weighted to a side that basically did not benefit the average American. So I voted against it. I think there are some adjustments that need to be made.”

Manchin chairs the Senate Committee on Energy and Natural Resources, which The Hill first reported is slated to mark up a 423-page legislative draft aimed at strengthening the nation’s energy infrastructure on Thursday. It contains provisions to boost electric grid resiliency as well as the energy efficiency of housing and commercial buildings.

It remains unclear how much of Biden’s education, healthcare, and childcare initiatives Manchin will ultimately embrace. His office declined to comment earlier this month on whether the West Virginia senator supported the permanent expansion of the child tax credit.

But the Democrats’ pivotal swing vote looks like he may be ready to make a deal.

Read the original article on Business Insider

Move aside, hot vax summer. Biden is bringing hot tax summer to the US.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

  • This summer everyone in Washington will be talking about taxes, while parents will get a tax credit.
  • Biden wants to raise taxes to pay for a huge infrastructure bill that may be ready in July.
  • Meanwhile, millions of American parents will start getting checks from Biden’s expanded tax credit.
  • See more stories on Insider’s business page.

You’ve probably heard that it’s hot vax summer. Vaccination rates have climbed, mask mandates are lifting, and Americans are slowly starting to venture into the first semblance of the After Times. In anticipation of the US fully reopening, cooped-up Americans are buying new going-out clothes and getting ready for the intimacy they put on pause. Even brands are getting thirsty.

But another thing will be heating up this summer: tax policy. President Joe Biden has already shepherded a law through Congress that will change the tax code (for a few years) to send monthly checks to American families, and he’s hard at work on another that would raise taxes on corporations and families earning more than $400,000 a year.

The tax-credit checks will start going out in July, just when Speaker Nancy Pelosi has vowed to deliver Biden his infrastructure bill in the House.

The stakes are scorchingly high, because despite the reopening economy, the pandemic exacerbated preexisting inequalities, while millions of Americans remain unemployed and April’s surprisingly dismal jobs report showed an uneven labor-force recovery.

Enter the hot tax summer.

Biden wants to raise taxes on the wealthy and corporations to offset massive infrastructure spending

Some of the country’s highest earners will see tax increases if Biden gets his way. He’s proposed increasing the income tax rate to 39.6% for Americans earning over $400,000, and raising the capital gains rate to the same level.

That increase – targeted only at Americans earning $1 million or more – would hit wealthy investors who get the bulk of their income from assets like stocks. The capital gains rate is generally lower than the rate that income is taxed at. As Insider’s Liz Knueven reported, the change would affect just about 0.4% of American taxpayers.

Overall, only the top 1% of filers would be affected and have to pay $100,000 more a year in taxes.

“This is about making the average multimillionaire pay just a fair share,” Biden said in a fiery speech defending the increases. “It’s not going to affect their standard of living a little bit.”

Significantly, Biden also wants to close up some tax-code loopholes and to ramp up tax enforcement on the wealthiest American, who have been found to hide billions in income from the IRS. The IRS estimates that there’s a tax gap of $441 billion a year. But Charles Rettig, the agency’s commissioner, has told Congress that the number could actually be over $1 trillion.

The gap between taxes owed and taxes paid could grow only if left untouched, according to the Department of Treasury. Treasury estimates that Biden’s proposed $80 billion investment in the IRS could bring in an additional $700 billion over 10 years. That would still leave hundreds of billions in taxes going uncollected each year, as Insider’s Ayelet Sheffey reported.

Biden’s also proposed raising taxes on corporations, aiming to bring the corporate tax rate up to 28% from 21%, though it will likely end up closer to the international average rate of 25%.

Meanwhile, an expanded tax credit will start putting checks into families’ pockets

Regardless of what happens with the infrastructure negotiations, many Americans will start feeling the effects of new Biden tax policies this summer.

Beginning July 15, families will start receiving monthly checks of up $300 from the IRS. Every 15th of the month for the next year – unless it falls on a holiday – checks will come. Those checks come from the expansion of the child tax credit, which was revamped under Biden’s $1.9 trillion American Rescue Plan.

One of Biden’s proposals in the American Families Plan is extending those checks through 2025 (many Democrats want to make them permanent). The checks are, as Insider’s Aria Bendix reported, essentially akin to basic income, and most children in the United States are set to benefit from then.

Low-earning Americans will also see an income boost from the expanded Earned Income Tax Credit, which subsidizes wages. According to an analysis from the left-leaning Center on Budget Policy and Priorities, over 17 million adults will now be eligible for an expanded subsidy.

Biden’s proposed tax increases are already seeing pushback. Some businesses have come out against the corporate increase, and there’s likely to be a lot of back and forth over what can and cannot be included in Biden’s two-pronged infrastructure package.

As Politico reported, lobbyists and executives think that they’ll be able to kill off many of the tax hikes that the president is putting forward. That could put some of Biden’s promises in jeopardy.

So while it’s not clear what, exactly, taxes will look like on the other side of all of this, they’re already in the spotlight – and they’ll probably only become a hotter topic as the temperature goes up this summer.

Read the original article on Business Insider

The IRS commissioner told lawmakers that child tax credit payments may not be issued monthly – and may not start in July

pregnant woman and child
The child tax credit is an allowance for parents within certain income limits.

  • The $3,000 child tax credit payments approved in the pandemic relief bill may not be sent monthly.
  • The payments, which were meant to start in July, may also be delayed, according to the IRS.
  • The child tax credit is a government-approved grant for parents with certain income limits.
  • See more stories on Insider’s business page.

The child tax credit payments approved in the most recent coronavirus relief bill may not be sent to parents monthly, and may not even start in July, according to Charles Rettig, the IRS commissioner.

The child tax credit is an allowance for parents within certain income limits. American citizens who qualify for the child tax credit can get part of it as recurring cash payments.

On March 11, President Joe Biden signed into legislative action the $1.9 trillion American package, kickstarting a massive government rescue effort for struggling families, in which the child tax credit was significantly increased.

The legislation means families will be eligible to receive $3,000 annual benefits per child from ages 6 to 17, and $3,600 per child under the age of 6 for the 2021 tax year.

The child tax credit payments were scheduled to start in July as monthly payments, instead of a lump sum. That now may not happen, especially since the IRS has extended the tax-filing season for citizens to May 17 from April 15, Rettig said during a hearing with the House Ways and Means Committee on Thursday.

The IRS now only has limited time to devote to implementing and initiating a portal for the program, which must happen by July 1. Rettig said: “I don’t have the resources to devote to that portal until the filing season ends. It might be a challenge to get it monthly right out of the box.”

The commissioner also specified that in the final bill, payments were changed to be sent periodically as opposed to monthly, to give the agency more flexibility. “We’re focused on trying to get these payments out to the people in a meaningful manner and a meaningful timeframe,” he said at the hearing.

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