(CNN) The families of more than 65 million children will start receiving enhanced child tax credit monthly payments of up to $300 on July 15, the Biden administration announced Monday.
The temporary benefit, which will be sent to 39 million households and covers 88% of children in the US, stems from the Democrats' $1.9 trillion coronavirus rescue package. The vast majority of families will receive the funds via direct deposit, while the rest will get checks or debit cards in the mail.
The Internal Revenue Service will send the payments on the 15th of the month, unless it falls on a holiday or weekend, through December. Eligible parents will receive $300 a month for each child under age 6 and $250 for each one ages 6 to 17.
Payments will be based on taxpayers' 2020 tax returns or their 2019 returns if the 2020 returns are not filed and processed yet.
To reach low-income households that don't typically file taxes, the agency is setting up a portal to allow them to submit their information. This will allow them to claim both the enhanced child tax credit and stimulus payments they might have missed. A similar online form existed last year to allow low-income Americans to receive the first round of stimulus checks from the March 2020 relief package.
Meanwhile, the IRS will also launch a separate portal to allow parents to update their address, bank account information and family size, as well as opt out of the monthly payments in favor of receiving the tax credit as a lump sum next year when they file their return. If a family's situation changes during the year, the IRS can adjust the payment when they file their 2021 tax return to claim the second half of the credit. Lower income taxpayers will not be required to return any overpayments, a senior administration official said.
More details about the portals will be announced in coming weeks, the official said. The administration also plans to launch an outreach campaign to inform families about the enhanced payments and the portals.
Under the American Rescue Plan, families can receive a credit totaling $3,600 for each child under 6 and $3,000 for each one under age 18 for 2021. This is up from the current credit of up to $2,000 per child under age 17. The enhanced portion of the credit will be available for single parents with annual incomes up to $75,000, heads of households earning $112,500 and joint filers making up to $150,000 a year.
The package also makes the tax credit fully refundable so that more low-income parents can take advantage of it. Until now, it has only been partially refundable -- leaving more than 20 million children unable to get the full credit because their families' incomes are too low.
Lawmakers also wanted to make it easier for parents to use the funds to cover their expenses during the year. So the law calls for sending families half the credit on a monthly basis, from July through December. They will then claim the other half on their 2021 tax returns.
Initially, the IRS was uncertain whether it would be able to provide the credit on a monthly basis starting in July, but Commissioner Charles Rettig told lawmakers last month that the agency is on track to meet that deadline.
The enhanced child tax credit alone is expected to cut child poverty nearly in half. In total, the Democrats' relief package is projected to reduce the share of kids in poverty by more than half, lifting more than 5 million children out of poverty this year.
Democratic lawmakers have been pushing the Biden administration to make the beefed up credit permanent, but President Joe Biden's latest proposal, the American Families Plan, would only continue the increased payments through 2025. The plan would make the credit fully refundable permanently.
The provision is projected to cost roughly $110 billion a year.
This story has been updated with additional details.