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Nearly two dozen states are ending federal unemployment benefits prematurely, meaning millions of people will soon be reducing or cutting their aid.
But families can expect a cash inflow from another source – the child tax credit – around the same time that their unemployment benefits dry up.
The IRS will be sending monthly tax credit payments starting July 15, the agency said last week. Eligible Households receive up to $ 300 per child under 6 years old and $ 250 for older children under 18 years of age.
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In the meantime, states are withdrawing from unemployment programs from mid-June to mid-July.
Child tax credit funds can help offset some of a household’s loss of income when laid-off workers lose unemployment benefits but cannot find work or return to work.
Around 46% of households receiving unemployment benefits also have children under the age of 18, according to the US Census Bureau’s Household Pulse Survey.
“It will help,” said Heidi Shierholz, director of politics at the Economic Policy Institute, a progressive think tank and former chief economist at the Ministry of Labor. “But for most families it will only be a fraction of what they lose.”
States that end the unemployment supplement
At least 23 states have announced their intention to withdraw from the pandemic programs that provide recipients with additional unemployment benefits of $ 300 per week. Most also stop helping the self-employed, gig workers and the long-term unemployed, generally defined as those who have been unemployed for more than six months.
Alaska, Iowa, Mississippi and Missouri will end this aid on June 12, the earliest of the states. Arizona, the last, will do so on July 10th.
The American Rescue Plan offers these federal benefits through September 6th.
According to an analysis of Labor Department data, the average person was receiving a total of around $ 2,500 a month in unemployment benefits in April. The analysis includes the weekly surcharge of $ 300.
However, it will be difficult to completely replace these benefits with monthly loan payments.
A household with one parent receiving the average benefit would need to have four children under the age of 6 and five older children to get roughly the same amount of monthly child tax credits back. The household would also need to qualify for the full loan.
The states in question, led by Republican governors, claim that improved unemployment benefits contribute to labor shortages. They believe the funds encourage workers to stay home instead of looking for a job, and challenges companies trying to hire.
Many economists believe that unemployment benefits can be a factor, but deny that it is central.
Instead, health risks are probably the main reason for a reduced workforce. They pointed to an ongoing threat from Covid infections and relatively low vaccination rates among adults of working age.
But there are other factors that contribute, such as the early retirement of older workers and the problems with childcare due to irregular school and daycare closings, according to economists.
Child tax credit
In addition to improving unemployment benefits, the US bailout plan made temporary changes to child tax credits.
Depending on age and income, the maximum annual loan has been increased to $ 3,000 and $ 3,600 per qualified child. That’s more than $ 2,000 per child. The credit is also paid out in monthly installments that run from July 15th through the end of the year.
The monthly revenue stream is a prepayment of half the value of the estimated 2021 child tax credit. The IRS bases payment amounts on information reported in 2020 tax returns or 2019 tax returns if not available for 2020.
Taxpayers who receive funds by direct deposit are likely to get the payments the fastest, said Elaine Maag, a research fellow at the Urban-Brookings Tax Policy Center. Paper debit cards and checks could take a little longer as the IRS has to mail them out, Maag said.
The IRS is also launching an online portal in the coming weeks that will allow taxpayers to update information that may affect the amount of their tax credit. You can also opt out of receiving monthly payments and instead receive the full amount in a lump sum at tax time in 2022.
Delays can also occur when taxpayers update information such as the number of children for the IRS to then review, Maag said. The agency will also likely need to undergo additional verification if more than one parent claims the same child on their tax returns, she added.