How the new tax credit is supposed to work
These payments, which are set to begin on July 15, are a beefed-up version of the child tax credit and were included in the massive COVID rescue package President Joe Biden signed in March.
For the rest of 2021, couples earning less than $150,000 (or $75,000 for single earners) will receive $250 a month for each of their children between ages 6 and 17, and $300 a month for kids younger than 6.
Most families won’t have to do anything to receive their cash. If the IRS has your current information, the money will appear in your account or be mailed to you as a paper check around the 15th of every month through the remainder of the year.
But if you don’t typically file your taxes or are running behind this time, you’ll want to submit a return immediately to ensure the IRS knows where you are and how to pay you.
The agency recently launched an online portal designed to make it easier and more efficient for parents to update their addresses and banking information.
But the IRS is already dealing with a backlog
The past year or so has been an exceptionally busy time for the IRS. In addition to getting out three rounds of stimulus checks over just 15 months, the tax agency also processed 136 million individual income tax returns during the 2021 filing season.
“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances," national taxpayer advocate Erin M. Collins wrote in her midyear report to Congress. "But there is always room for improvement."
Collins says the IRS managed to get out both stimulus checks and most refunds in a timely manner. But — and this is a big "but" — the agency is still looking at a backlog of more than 35 million individual and business income tax returns that need to be manually processed for this year.
Included in that number are about 16.8 million paper tax returns waiting for employee involvement to be processed, 15.8 million returns that need further review, and about 2.7 million waiting to be added to the pipeline.
That's a lot of people waiting for money they may need to cover household expenses or pay down debt.
Some experts worry about awareness, rollout
Advocacy groups are concerned that families might miss out on their special stimulus checks because they haven't heard about them. A recent poll from the liberal think tank Data for Progress found 53% of Americans were unaware of the expanded child tax credit.
"I think part of it is simply that this was done very quickly and just in the last several months," says Stephen Nuñez, lead researcher on guaranteed income for the Jain Family Institute.
“This is not something the IRS has historically done," Nuñez says. "The first round of stimulus checks got off to a very slow and bumpy start. But the second and third rounds of checks were a lot more streamlined."
He’s optimistic that after three stimulus payments over the course of the pandemic, the IRS is now set up for success. Still, he sees a risk people may receive a payment in the mail and not know what it is, or not trust it and throw it away.
"I think we are all hoping that they learned a lot and built a lot of capacity that will be put to good use,” says Nuñez. “It is still a heavy lift — we’re talking about 40 million checks on a monthly basis for six months. There may be some bumps."
What to do if you're left waiting for your checks
If you need a little extra boost to your budget right now, you have a few options if the IRS indeed run into delays rolling out the new payments.
Deal with your debt. If you’re juggling multiple credit card balances and other high-interest debt, fold them into a single debt consolidation loan. You’ll have only one payment to budget around, and the lower interest rate will slash the cost of your debt and help you pay it off faster.
Curb your insurance payments. If you haven’t shopped around for a better rate on your homeowners insurance lately, your policy could be costing you hundreds of dollars extra every month. A little comparison shopping might easily find you a lower price. The same trick works well for scoring a cheaper rate on car insurance.
Pay less every time you shop. Prices can be all over the place when you shop online. Avoid paying too much by downloading a free browser add-on that will automatically hunt for lower prices and coupons before you check out.
Turn your pennies into a portfolio. You don't need to wait for a "stimmy" to give your budget a boost. A wildly popular app can help you take advantage of the red-hot stock market just by investing your "spare change" from everyday purchases.