The first monthly advance payments from the expanded child tax credit created by the $1.9 trillion American Rescue Plan will be issued by the IRS on Thursday, July 15.
The credit, which is worth as much as $300 per month per child based on eligibility, will be a welcome addition to many families’ bank accounts. But there are good reasons why some parents may not want the monthly payments.
If you earn more in 2021 than you did in past years, you could be disqualified from the credit, which could be as much as $3,600 per child up to age six and $3,000 per child ages 6 to 17.
If you receive the payments and it’s determined you’re not eligible when you file your 2021 tax return, you will have to pay the money back.
Your eligibility for the credit could also change if your child’s birthday puts them over the age cutoffs during 2021, even if they were eligible in 2020.
Some divorced or unmarried parents may also want to opt out for the credit if they alternate years for taking the credit with the child’s other parent. For example, if you took the credit on your 2020 return and receive the advance payments, which are based on your 2021 return, getting the credit two years in a row could cause the IRS to ask for the money back.
If you don’t want the monthly payments, it’s too late to opt out for the one that will arrive on July 15. But you still have a chance to opt out of future payments by using the IRS’ Child Tax Credit Update Portal.
The deadline is 11:59 p.m. on each date:
- Aug. 2 for the Aug. 15 payment
- Aug. 30 for the Sept. 15 payment
- Oct. 4 for the Oct,. 15 payment
- Nov. 1 for the Nov. 15 payment
- Nov. 29 for the Dec. 15 payment
Those who opt out of the payment can still get the benefit if they ultimately qualify because their situation didn’t change as they expected. Then they will take the credit as part of their 2021 tax return and it will come as a refund or to offset any taxes owed.
Singles with adjusted gross income of up to $75,000 and married couples who file a joint tax return and earn up to $150,000 would get the full amount based on 2019 or 2020 tax returns, or based on information that taxpayers entered last year into the IRS’ Non-Filers tool.
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Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com.
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