One final blast of cash is set to arrive Wednesday for roughly 36 million families – including about 1 million families in Michigan – who are eligible for the advance payment for the child tax credit.
But what happens in January?
The money will stop unless Congress passes President Joe Biden's Build Back Better social spending and climate package. The economic package is stalled in the Senate.
Experts said families might see another round of direct payments in 2022, but it's unlikely any cash would show up as soon as a month from now.
► The Daily Money: Get our latest personal finance stories in your inbox
Don't bet on January
"As of now, no one should expect a payment on Jan. 15," said Matt Hetherwick, director of individual tax programs for the nonprofit Accounting Aid Society in Detroit.
The monthly payments, which began July 15, were limited to 2021, and the last one is set for Wednesday.
The changes involving the child tax credit are part of the American Rescue Plan, which was signed into law March 11..
The Build Back Better version passed by the House would extend the advance payments through next year, but the bill has not passed the Senate.
Debate over the economic package could drag into 2022.
"It is possible that, if Congress does eventually pass the bill with the current advance payment provision still in it, the Jan. 15 payment could be made late once the IRS has the authority from Congress to issue the payment," said Mark Luscombe, principal analyst for Wolters Kluwer Tax and Accounting.
Best bet: Don't plan to tap into child tax credit cash to cover next month's big bills.
► What's in the Build Back Better bill? Paid leave, universal pre-K and more
Plan to cut expenses
Not seeing an extra $430 a month on average could be shocking for many families who use that cash for rent, car payments, unexpected emergencies and food, gas and home heating, which have undergone rapid price hikes.
The advance monthly payments amount to up to $300 for each child age 5 or younger and up to $250 for those ages 6 to 17.
Some families who qualify received up to $900 a month for three young children.
Six months of advance payments made quite a difference for people's budgets – giving breathing room to middle-income families who face one bill after another when they're raising children and giving relief to families struggling during the pandemic.
► Why is everything so expensive? A quick look at what 1982-level Inflation means in 2021
Extra money in December will be welcome
The December money is key for many, given higher utility bills, higher prices due to inflation and extra holiday expenses.
"I'm praying for it, believe me," said Sharon Bayn, 63.
Bayn, who lives in southwest Detroit, didn't start getting money until October after she received free help from the Accounting Aid Society in filing her tax returns.
Bayn has guardianship over her 15-year-old grandson, Ronald, a freshman at Western International High School in Detroit. She wasn't sure why she didn't get any of the advance payments once they began being sent by check or direct deposit in July.
On a hot August day, two women from the nonprofit Congress of Communities walked door to door in Bayn's neighborhood to get the word out to families who qualify for the advance payments but might miss out.
They talked to Bayn over the fence at her home, handed her some pamphlets and told her where to call for help.
Bayn had not filed tax returns for years because she wasn't required to do so because of her low income. That's why she didn't get the advance monthly payments automatically, like millions of other families.
After talking to Accounting Aid and filing her tax returns, Bayn received $500 for the advance child tax credit in October, and she received another $500 in November – making up for the three months that she didn't receive anything. Otherwise, she would have received $250 a month for her grandson, beginning in July.
Bayn lives on a limited income, including $740 a month in Social Security benefits and a pension of $90 a month that her husband who died in 1988 earned at McLouth Steel.
She's been able to pay some bills, buy clothes for her grandson for high school and fix the family van last month when the brakes went out.
"The money comes in ... handy," she said.
Bayn, who receives monthly assistance from the federal Supplemental Nutrition Assistance Program, said the extra money from the credit helped her deal with the rising cost of food. SNAP benefits, which went up in October, typically don't cover a household's entire grocery bill.
The Detroit grandmother said she pays $3.49 a pound for hamburger, buying in bulk; it was about $2.99 a year or so ago. Bread has gone up where she shops, she said, from about 89 cents to $1.10 a loaf.
Inflation hit a 39-year high as consumer prices jumped 6.8% for the 12 months ending in November.
Once the December check arrives, Bayn plans to buy Christmas gifts for her grandson: "Ronald's getting a good Christmas."
As for January, Bayn knows things are uncertain when it comes to the expanded child tax credit.
She's not banking on receiving any money next year – but she does plan to file a 2021 tax return for the remaining amount she's due for the child tax credit.
The advance payments should amount to half of what someone would be qualified to receive. (The IRS has been matching up advance payments based on 2019 or 2020 tax returns.)
Bayn said she hopes for the continuation of the advance monthly payments for the credit – but isn't depending on it.
"If it comes in, it's a blessing to me," she said.
The child tax credit isn't limited to those living on a low income, but it was designed in part to help children out of poverty.
Detroit Mayor Mike Duggan called the money a "one-time windfall" for families in June as efforts built in the area to make sure that the complicated, and potentially confusing, expanded child tax credit would reach families who needed it the most.
Changes to the credit involved increasing the benefit, expanding access to reach children in families with the lowest incomes and giving advance payments in monthly installments to those who qualified. Families are eligible even if they do not usually file taxes or have low or no earnings. The child must have a Social Security number. (Under the Build Back Better bill that passed the House, Luscombe noted, the Social Security number requirement would be dropped.)
Remember the child tax credit at tax time
Families need to file the 2021 income tax return next year to claim the second half of the child tax credit that they're eligible to receive.
If you received any money for the child tax credit this year, watch out for important paperwork next month.
In January, you need to keep an eye out for a letter from the IRS – officially dubbed "Letter 6419" – that will spell out how much money you received for the advance child tax credit payments in 2021.
Hold onto that letter, and file it with other important tax paperwork.
If you think the number on the letter is not accurate, Luscombe said, the taxpayer would want to go to the child tax credit update portal at irs.gov.
You can check the information on that site for what the IRS says was paid. Possible reasons for differences, he said, might be advance payments going to a different bank account or a check lost in the mail.
"If after checking the portal, the taxpayer still feels that the Letter 6419 is in error, they could then contact the IRS," Luscombe said.
What happens if you didn't receive any money in advance in 2021?
It's even more important to file a 2021 income tax return for families who would qualify for the child tax credit but did not receive any advance payments this year.
It may be possible, if you qualify, that you'd get a lump-sum payment by claiming the child tax credit when you file a 2021 federal income tax return.
This is an important point, especially for lower-income families or those with no income who normally don't make enough money to be required to file a federal income tax return.
What if you received the wrong amount?
Again, this is something that can be addressed when you file the 2021 tax return next year.
"If the taxpayer believes that they should have received more or less advance payments than they actually received," Luscombe said, "the taxpayer can resolve that issue by calculating the correct child tax credit on the 2021 tax return to reflect the advance payments that were actually received and adjust for the difference."
We will probably hear more about the child tax credit and the possibility that parents could receive advance payments money next year.
But again, experts said they wouldn't bet on seeing more money as soon as mid-January.
ContactSusan Tompor via [email protected]. Follow her on Twitter@tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.
