A fourth stimulus check may never come, but a similar payment will start to hit the bank accounts of many starting next month. This new payment, called the Child Tax Credit (CTC), in many ways, is similar, as well as different from the coronavirus stimulus check.
Coronavirus stimulus check and CTC: similarities
There are no spending restrictions on both stimulus checks and CTC, meaning people are free to spend them on whatever they want. Moreover, in both cases, the amount you qualify for depends on the income threshold, and it is the IRS that determines the final payout depending upon the most recent tax return data.
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The income limit to qualify for the full payment is the same for the stimulus checks and the expanded CTC. For instance, individuals making less than $75,000 a year ($150,000 for married filing jointly, and $112,500 Head of Household) qualify for the full payment under both, stimulus check and CTC.
Another similarity between the two is that these payments have no impact on the person’s eligibility for benefits. Both these payments don’t count as taxable income, and thus, don’t affect the eligibility for income-based benefits. If they had counted as income, they would not only affect eligibility for benefits, but may also raise the tax liability.
Stimulus checks and CTC: differences
Talking about the differences, the biggest is that the stimulus checks went to families with no kids as well. If a family had a qualifying dependent, the IRS sent a separate payment, along with the stimulus check.
However, if you have no kids in your family, then you won’t get any Child Tax Credit. Also, the child needs to have a Social Security number, and must have stayed with the taxpayer who is claiming the credit, for a minimum of six months in the year.
Another major difference between the two is that making adjustments, or providing or updating eligibility information to the IRS, would be more real-time in the case of the CTC. The IRS has already launched the “Child Tax Credit Update Portal.” People can use this portal to provide information on the number of eligible kids, as well as to opt out of monthly payments.
Moreover, the IRS has promised that in the coming months, it will continue to come up with more categories that users can update to provide the agency with accurate information to determine their eligibility and the payment amount. For instance, the users will be able to change their bank account information, mailing address, family status and income changes.
Another difference is that families who get more in CTC payments than they are eligible for, will have to return the extra credit. This wasn’t the case with the stimulus payment. Similar to the stimulus checks, the IRS is using the 2019 or 2020 tax return data to determine the eligibility for the CTC payment.
However, if a taxpayer's income somehow increased during the year, it could change their eligibility for the CTC payment. In such a case, the taxpayer may have to return the extra payment when they file a tax return next year.