IRS Is About to Ship December’s Little one Tax Credit score Fee. January’s Depends upon Congress.

“We’re going to move it this 12 months. It’s going to get prolonged,” mentioned

Sen. Sherrod Brown

(D., Ohio). “The kid tax credit score goes to be like Social Safety: ‘How dare you’re taking it away!’ ”

The IRS will make its sixth set of funds—as much as $300 for kids beneath age 6 and $250 for teenagers ages 6-17—on Dec. 15. Underneath the social-spending and climate-change invoice the Home handed final month, funds would proceed by means of 2022.

To make sure the month-to-month funds proceed uninterrupted, Senate Democrats are aiming to move the laws by Christmas and ship it again to the Home for a ultimate vote. The IRS has advised lawmakers they need to hit a Dec. 28 deadline or danger imperiling a mid-January cost, congressional aides mentioned.

However the credit score extension and the broader Biden agenda are in limbo, as Democrats work by means of a collection of procedural challenges and search consensus on a ultimate set of unresolved coverage questions for the bundle.

Sens.

Joe Manchin

(D., W.Va.) and

Kyrsten Sinema

(D., Ariz.), whose assist will likely be essential for Democrats to move the laws within the 50-50 Senate, haven’t signed onto the invoice, creating uncertainty for his or her social gathering’s Christmas timeline.

Mr. Manchin criticized the scope of the credit score and complained about briefly extending applications that are supposed to be everlasting. He mentioned Wednesday that he was unconcerned concerning the timeline for extending the kid tax credit score, suggesting that Congress may tackle any lapse as soon as the laws passes.

“I’ve by no means seen a scenario the place we weren’t capable of make up no matter you thought time could be misplaced,” Mr. Manchin mentioned. “You must get the invoice proper.”

Many Democrats had initially hoped to increase the kid tax credit score for a number of years however proposed a one-year plan in an effort to scale back the bundle’s value and safe Mr. Manchin’s assist.

Most Democrats strongly assist the credit score, which is aimed toward decreasing youngster poverty. Congress briefly expanded the credit score by a party-line vote in March, making a number of adjustments to the $2,000 per-child credit score in place for the reason that 2017 GOP tax regulation.

The credit score is now $3,000 and $3,600 for kids beneath age 6, and it begins to section right down to $2,000 a toddler as soon as earnings reaches $75,000 for people, $112,500 for heads of family and $150,000 for married {couples}.

Households now get the complete credit score even when they’ve little or no earnings, after the March regulation eliminated limits. It’s paid month-to-month as an alternative of solely on tax returns. These adjustments made the credit score a near-universal youngster allowance—however just for 2021. The newest funds totaled almost $16 billion, for greater than 61 million kids.

If the credit score expires, Congress may reply in a model of the invoice enacted subsequent 12 months. Lawmakers may instruct the IRS to unfold the complete credit score over 11 months, authorize a double cost for one month or pursue another strategy. Thus far, high Democrats aren’t prepared to entertain these prospects publicly.

“It’s terribly essential—capital E terribly essential—to maintain the kid tax credit score on monitor,” Senate Finance Chairman

Ron Wyden

(D., Ore.) mentioned when requested about contingency plans if negotiations go into January.

Lawmakers hardly ever act on main laws with out arduous deadlines. Democrats have strained to search out one thing that might power them to wrap up months of talks on the social-spending and local weather bundle referred to as Construct Again Higher. Some Democrats are already floating engaged on the invoice after Christmas.

A lapse within the credit score may show difficult each for households which have come to count on it and for Democrats who’re desperate to tout the profit to their constituents.

“It’s helped so many kids, and I don’t need to see it expire,” mentioned

Sen. Catherine Cortez Masto

(D., Nev.), who faces a troublesome 2022 re-election marketing campaign.

Even when the credit score will get prolonged, Democrats would wish to revisit it subsequent 12 months, maybe in a lame-duck session in the event that they lose management of the Home or Senate within the midterms. Republicans are, at most, lukewarm concerning the expanded credit score.

Sen. Tim Scott

(R., S.C.) mentioned Congress ought to let the growth expire as scheduled.

The Home-passed invoice contains some adjustments for 2022. Month-to-month funds would now not go to households which are above earnings limits for the expanded credit score however that do get the $2,000 credit score. These individuals would declare the credit score on tax returns.

The Home invoice additionally expands the credit score to households, typically with immigrants, the place kids lack Social Safety numbers. Regardless that the expanded credit score would expire after 2022, the Home invoice contains one everlasting change to the underlying credit score: It removes minimal earnings necessities for receiving the complete quantity.

The opposite main time-sensitive provision is the proposed enhance to the $10,000 cap on state and native tax deductions. The Home invoice would apply its change—to $80,000—to 2021 tax returns filed in early 2022.

Senate Democrats try to make the Home plan much less beneficiant to rich Individuals however haven’t reached a deal on how to take action.

Sen. Bob Menendez

(D., N.J.) mentioned he and

Sen. Bernie Sanders

(I., Vt.) are searching for to stop households making greater than $1 million a 12 months from receiving a extra beneficiant deduction beneath the laws, although they’re nonetheless figuring out the earnings cutoffs.

Congress could make retroactive tax-code adjustments, however that poses challenges for the IRS, notably as soon as the company publishes annual tax varieties and begins receiving tax returns. Nevertheless, Congress modified the 2020 tax guidelines for unemployment compensation final March, and the IRS processed greater than 11 million refunds for individuals who had filed beneath the prior guidelines.

—Eliza Collins contributed to this text.

Write to Richard Rubin at richard.rubin@wsj.com and Andrew Duehren at andrew.duehren@wsj.com