On July 15, many of our TAC clients who are full-time parents or caregivers to school-aged children, began receiving their Advance Child Tax Credit payments from the IRS. The expanded child tax credit is part of the American Rescue Plan, signed by President Joe Biden in March. For the 2021 tax year, the credit increased to $3,000 from $2,000 for dependents ages 17 and younger. It also gives an additional $600 for children under the age of 6.
Those who qualify for the program will receive the first half of the credit in advance monthly payments from July to December this year – unless you opt out. Then, you will receive the full credit in a lump sum when you file their taxes in 2022. The monthly amount will be $250 for children ages 6 to 17 and $300 for children under 6 in families receiving the full credit.
While receiving these payments in advance has been welcomed by many of our TAC clients, others may choose to opt out. This post will address the reasons why opting out of the program would be beneficial for some TAC clients – and how that process is achieved.
Why un-enroll from the program?
According to IRS.gov, you may want to unenroll from receiving advance Child Tax Credit payments for several reasons, including if you expect the amount of tax you owe to be greater than your expected refund when you file your 2021 tax return. The payments you receive are an advance of the Child Tax Credit that you would normally get when you file your 2021 tax return.
Because these credits are paid in advance, every dollar you receive will reduce the amount of Child Tax Credit you will claim on your 2021 tax return. This means that by accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase.
You may avoid owing tax to the IRS if you unenroll and claim the entire credit when you file your 2021 tax return.
When should you unenroll?
To stop advance payments, you must unenroll three days before the first Thursday of next month by 11:59 p.m. EST. You do not need to unenroll each month, however you will receive the next scheduled advance payment until the IRS processes your request to unenroll, which could take up to seven days. The IRS recommends that you check back after unenrolling to make sure your request was processed successfully.
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To unenroll, use the Child Tax Credit Update Portal, found here.
If you have further questions about the Child Tax Credit or unenrolling from it, please visit the IRS website for more information, or contact Max or Nathan to learn more. # # #