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: The final child tax credit payment of 2021 is here. Is it the last one ever? Here’s what happens next

Millions of parents are opening their bank accounts Wednesday to find December’s round of child tax credit payments. It’s the last scheduled payment for the expanded version of the credit that families received this year.

Should they say farewell to the direct payments for good, or see you next year?

What happens next is an open question, some observers say.

“I remain confident that some form of the extended child tax credit will be passed into law,” said Rachel Snyderman, associate director of economic policy at the Bipartisan Policy Center. “What remains unclear is what the specifics of that extended child tax credit will be.”

If history is any guide on the arc of a tax credit that started in the Clinton administration, it suggests some iteration of the current payout will stick around, said Elaine Maag, principal research associate at the Tax Policy Center.

“The Child Tax Credit has been temporarily expanded many times over the years, and we’ve never gone back to a previous version of the credit that was smaller,” she noted. “My hope is this time, it’s true too.”

The U.S. House of Representatives cleared the way for monthly child tax credit payments in 2022 when it passed the Biden administration’s $1.75 trillion social safety net bill last month. But the Build Back Better legislation is on hold in the Senate, where the president cannot afford any Democratic defectors.

That includes Sen. Joe Manchin, a Democrat from West Virginia, who reportedly has concerns about the credit in its current form and worries about the bill’s potential effect on already-high inflation.

Since July, advance payments on the boosted tax credit have been supplying up to $300 for every eligible child up to age 6. The payments are up to $250 for children between the age of 6 and 17.

Last month, the Internal Revenue Service sent out more than $15 billion in payment to households with approximately 61 million children. From July to November, the IRS distributed approximately $77 billion under the credit, according to the Treasury Department.

The credit was enhanced in March, when Democrats passed the $1.9 trillion American Rescue Plan. For one year only, the legislation increased payouts to $3,600 per child under age 6 and $3,000 for children between the age of 6 and 17.

The credit was previously $2,000. The Trump-era Tax Cuts and Jobs Act of 2017 increased the credit to $2,000 from $1,000.

Some families will have to pay back the credit next tax season

On a practical level, one thing that’s definitely coming next is a letter from the IRS to families that received the credit.

The document, dubbed Letter 6419, will be sent next month and it will document the full amount the IRS paid to the recipient.

Hold onto the letter for your records at tax time, the IRS says. The advance child tax credit payments are similar to stimulus checks because the payment have no spending restrictions.

Unlike stimulus checks, however, if a household made too much money by the end of the year, it may have to pay back the excess child tax credit advances at tax time. The IRS has said it will likely do this by skimming the owed amount from the income tax refund.

People who wanted to avoid this kind of tax season surprise had the chance to skip out of the advance payments.

Households making less than $75,000 were more likely to spend the monthly payments than households above that point, according to Maag’s research of U.S. Census Bureau information. Around half of people said they used the credit cash for food. When people spent the credit’s cash, clothing and utilities accounted for 30% and 29%, while school books and supplies accounted for 25%.

The credit has contributed to sizable drops in child poverty and food insufficiency, according to Columbia University researchers.

Some polls paint different pictures on public perception of the expanded tax credit. For example, most parents (64%) who received the credit said it helped “a little” and 15% said it helped “a lot,” according to an NPR/Marist poll this month.

Another says families — especially low-income ones — will miss the payments dearly. One half of people said it would be harder to meet their family’s needs without the payments, according to a poll from ParentsTogether Action, an advocacy organization. Most people in the poll made less than $75,000 and over one-third said they couldn’t meet their family’s basic needs without the payments.

The political questions on what’s next

To be clear, the child tax credit isn’t going away if the expanded form doesn’t live on. It would just revert to its $2,000 cap, Maag noted — including rules allowing $1,400 of the sum to be fully refundable to low-income families without a tax liability, she added.

The House version of Build Back Better permanently makes the credit fully refundable.

Alterations on payout amounts and income thresholds are some of the ways lawmakers might find room for compromise, Snyderman said. In the current version, full payments go to individuals making up to $75,000 and $150,000 for married couples filing jointly.

Many Democratic lawmakers don’t want a turn back to the former version, not when they say many families have come to depend on the monthly money source. That’s why the bill needs to move quickly so families get another payment in the middle of January without any interruption, supporters said.

Rep. Rosa DeLauro, a Democrat from Connecticut, who’s been a longtime advocate for the credit, said the IRS could be nimble and pull off a tight turnaround from enactment to new round of checks. “I have been told we can move and we can move quickly,” she said.

The IRS started distributing second- and third-round stimulus checks days after enactment.

“If we miss this moment, it’s not coming back again,” she said. “We have to seize it.”

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