Should You Opt Out of Child Tax Credit Monthly Payments?
Millions of American families are due to get an advance on their child tax credit payments starting in mid-July. Thanks to the American Rescue Plan Act of 2021, the payments are up to $1,600 larger than they were last year, and the monthly payments may assist families who struggle with day-to-day expenses all year. Spacing out the payments may also help families during certain high-cost times of the year, such as PCS moves, back-to-school purchases, military transitions, or holiday shopping.
There are, however, some taxpayers who may choose to opt out of the advance payments on the IRS website and file for the full payment on their next tax return. If you receive more in advanced child tax credit payments than you are eligible for, you may have to pay back the IRS any amounts that you are overpaid.
The full credit is $3,600 per child under age 6 and $3,000 for those older than 6 and under 18 years old. However, it starts phasing out in $50 increments for single filers who make over $75,000 and joint filers making over $150,000. You can use this calculator to get an idea of how much credit you may receive.
The IRS will take the credit you are due – for example, $3,000 for a 16-year-old – and divide it in half, which is $1,500. Then it will further divide it into 6 payments, which would be $250 ($1,500/6). A family could expect to receive $250 per month from July to December and then the rest of the credit, $1,500, in 2022, when they file their tax return next year.
Five reasons to opt-out of the payments – do any of these situations apply to you?
- You usually owe money to the IRS
- Your tax situation has drastically changed this year because you got a job or a higher paying job
- You have children who are aging out of qualifying
- You share custody of your children and have not worked out who is claiming the credit
- You know you will be making a large payment in the spring and would rather get the entire credit at once
Reasons to take the advance payments: anything other than the above!
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- Written by Lila Quintiliani
- Category: Blog
- Published: 22 June 2021