The second round of monthly payments for the advanced Child Tax Credit expanded to include 1.6 million more children and the Internal Revenue Service (IRS) sent out more than $15 billion in August.
Congress' passing of the American Rescue Plan expanded the Child Tax Credit and established a monthly payment schedule so parents received financial relief well before they filed their taxes. The goal is to provide relief to parents struggling amid the pandemic and President Joe Biden has backed making the increased credit permanent.
Under the American Rescue Plan, parents who are eligible for the full credit will receive $3,600 for each child under 6 years old, an increase of $1,600 from the standard credit. Payments for children between 6 and 17 years old will be $3,000, an increase of $1,000 from the standard payment.
With half a person's allocated credit going out in monthly payments, an eligible parent will receive up to $300 a month for each child under 6 and $250 a month for each child under 17. Payments are set to be made on the 15th of each month, unless that day falls on a weekend or holiday.
Given that August 15 falls on Sunday, payments hit people's bank accounts on Friday. Payments were sent out for 61 million children, according to the IRS, the vast majority of which were sent via direct deposit. Parents who don't use direct deposits will receive their payment after the check arrives in the mail.
About 15 percent of people who received their first Child Tax Credit payment by way of direct deposit will receive a paper check for August's payment. The IRS attributed this to a "technical issue" that will be resolved by the time September's payment goes out.
"Today 61 million children across America are benefiting from the advance Child Tax Credit, helping families put food on the table and meet the needs of the next generation," Treasury Deputy Secretary Wally Adeyemo. "We want every eligible family to have access to the advance Child Tax Credit, which is why we will continue our outreach efforts to drive enrollment as our children return to school."
July's payment was predominantly used to pay for food, including groceries, eating out and ordering take out, according to a recent U.S. Census Bureau Household Pulse Survey. The next most popular use for the funds was to pay for utilities, followed by clothing.
Charitable donations, transportation for school and tutoring services were the least popular ways people spent their Child Tax Credit payments. However, more than 11 million people reported using the funds for school related expenses, such as books and supplies, tuition, and after school programs other than child care and tutoring.
In July, President Joe Biden called on Congress to take action to extend the expanded Child Tax Credit. He said people who are "working hard and paying taxes deserve a break" and the administration is looking at keeping the credit in place for four years, with the hope of it becoming permanent.
"This is a right thing to do, and it's a smart thing to do," Biden said of the expanded Child Tax Credit.
