The IRS’ extended tax day deadline of May 17 is right around the corner. With it comes the deadline for eligible American families to take advantage of important COVID-relief benefits that are tied to this year’s tax returns. These benefits include refunds for those people who paid taxes on unemployment benefits received in 2020, as well as reduced health insurance premiums.
Many people’s ability to receive all or some of their third-round federal stimulus payment of up to $1,400 is also dependent on their filing tax returns. This includes those people about whom the IRS previously did not have sufficient information before they filed a 2020 tax return, as well as those people whose initial eligibility for a stimulus payment was based on information in their 2019 tax returns, but whose 2020 returns indicate that they are eligible for more money following a loss of income or a change in dependent status through what the IRS calls “plus-up” payments. The IRS’ most recent batches of stimulus payments have focused primarily on distributing payments to these groups of people.
2020 tax returns also include something called a recovery rebate credit, which allows those people who did not receive all of the money that they were eligible for as part of the first two rounds of federal stimulus payments to claim any outstanding money.
But the May 17 tax deadline is also critically important for those people looking to take advantage of another very significant benefit. Passed in March, the American Rescue Plan also included changes to the child tax credit.
Under the new system, individuals or couples who fall below certain income thresholds will be eligible for an enhanced child tax credit of $3,600 for children under six years of age and $3,000 for children older than six. The expanded credit also raised the age of qualifying children to allow for a credit for children up to seventeen years of age. Half of the credit will be claimed by eligible parents when they file their 2021 tax returns next year, while the other half will be made available as regular monthly payments of either $250 or $300.
In order to take advantage of the expanded child tax credit, however, eligible American parents must file their 2020 tax returns by the May 17 deadline. The IRS needs the returns in order to be able to calculate and send payments starting in July.
One of the Biden administration’s two proposed pieces of legislation, the American Families Plan, would see the expanded child tax credit extended until 2025.