How Does the American Rescue Plan Act Benefit Under Resourced Families with Children?
The new American Rescue Plan (ARP) Act includes many new and expanded initiatives to help families with low incomes recover from the additional hardships brought by the pandemic. Still, many Georgia families are unaware that these resources are available or what they need to do to benefit from them.
Below, we provide more information (created by the National Center on Parent, Family, and Community Engagement and other resources) for two significant programs that are offering families some financial relief. These benefits do not affect family income in determining eligibility for child care subsidies or other federal benefits like SNAP, nor do they count toward adjusted gross income for tax filers.
Monthly Child Allowance
What’s New?
The ARP Act created a monthly child allowance to replace the current Child Tax Credit (CTC). Beginning in July 2021, families who qualified for this year’s CTC on their tax return will receive monthly payments of $300 per child younger than age 6 and $250 per child ages 6–17. This 1-year program will end on December 31, 2021. Individual Taxpayer Income Number (ITIN) holders, including immigrant families with children who have Social Security numbers, are eligible to receive this credit. The IRS has launched a simplified online tool that will allow families not automatically enrolled in the program to receive the CTC.
What Can Families Do?
Families should start receiving monthly payments in July 2021. The payment amount is based on the number of children claimed as dependents on a family’s most recent tax return (i.e., 2019 or 2020). To ensure that they receive the monthly payments starting in July 2021, families should file a 2020 tax return as soon as possible. Families will retroactively claim this allowance from January to June 2021 on next year’s tax returns. For more information, visit ChildTaxCredit.gov.
Families can also use the IRS portal to add or update bank account information, as well as add any children born in the latter half of 2021.
Child Care Expenses
What’s New?
The ARP Act expands the size of the Child and Dependent Care Credit. Families are eligible for this tax credit if they needed care for any child younger than age 13 or for a disabled dependent of any age while working or looking for work. This benefit includes any amount paid (full or co-pay) for center-based child care, babysitter care, summer camp, or care by adult relatives outside the tax household. ITIN holders, including families who are immigrants with children born in the United States with a Social Security number, are eligible to receive this credit.
What Can Families Do?
Families should keep records (see below) of their child care expenses to report on next year’s tax return. Even those who do not owe taxes should file because the credit will be fully refundable and could result in a refund.
You will also need to provide the name and address of your child care provider(s) as well as your provider’s a tax identification number or Social Security Number. You should know that if you ask for a tax ID, and they do not provide one, you can still claim the CDCTC. You can claim expenses from many different care arrangements (including a babysitter, family member or neighbor, nanny, child care center or family child care home, before- or after-school care, summer day camp, etc.), you cannot claim expenses if you paid them to your spouse, your child’s other parent, your child who is under age 19, or a dependent whom you claim on your tax return.
Although some of these credits will not start until you file your taxes next year, the most important thing you can do right now is file a 2020 tax return. This will ensure that you receive the full amount of the first two stimulus payments that were paid out in 2020 and the full amount of your third stimulus payment from the ARP. The IRS may have already sent you a third stimulus payment based on your 2019 tax return but filing for 2020 can qualify you for a larger payment if your income dropped during that year.
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