3 reasons to opt out of monthly child tax credit payments by Aug. 30
The third child tax credit payment is scheduled to arrive in just under three weeks, but the last day to opt out of that check is this Monday. Are you having second thoughts about receiving the money this year rather than wait until 2022? If so, you should know that opting out has its perks for next year. You won't have to worry about repaying the advance payments and you'll get a bigger tax refund in 2022.
Note that you won't be turning down the credit if you opt out; you'll just be delaying when you get it. Plus, these advance payments are not a tax deduction, but an actual cash credit, and they won't count as income on your tax return. You may choose to unenroll if your income or circumstances have changed since your 2020 tax return. Think about whether your household details might be different this year, or if you're saving for a large expense.
For parents who choose to keep the payments coming in, monthly payments could be up to $300 per kid. But if you're on the fence, you can use the IRS Update Portal to opt out. Keep in mind that the tool requires setting up an ID.me account. If you decide to use the advance payments to cover expenses now, here are some ways to spend your child tax credit money. This story was recently updated.
3 reasons why parents should opt out of monthly payments
Here are some cases where unenrolling from the 2021 advance child tax credit program could be a good idea:
What does opting out now mean for your taxes next year?
Those who choose to decline this year's child tax credit installments (amounting to half the total) will still receive the same amount of money in the end, but are simply delaying when they receive it. So if you have a child who's 5 years old or younger by the end of 2021 and your income meets the requirements, you'll get $3,600 total when you file your taxes in 2022.
Be aware that if you unenroll from getting the monthly child tax credit payments this year, you won't get your full payment -- or any payment at all -- until after the IRS processes your 2021 tax return in 2022. The total amount will then arrive with your tax refund or can be used to offset any taxes you owe at that time; you'll be in a situation similar to people who have had to claim missing stimulus checks this year.
However, if you chose to receive monthly advances, you'd get six installments of $300 payments each month this year and another $1,800 with your tax refund next year instead. Keep in mind that if you take the money in advance now, it could lower your tax refund next year because you may get more money than what is owed to you. It will also mean you'll have fewer deductions since you've already collected the credit.
You can use our child tax credit 2021 calculator to estimate how much you should get and see a breakdown of the monthly payments if you choose not to opt out and meet all eligibility requirements.
How can parents opt out of getting child tax credit checks?
If you want to unenroll before the Sept. 15 check, you have until 9 p.m. PT on Aug. 30. You can opt out anytime in 2021 to stop receiving the rest of your remaining monthly advances, even if you've already received the first few payments To unenroll, the IRS said you must opt out three days before the first Thursday of the month in order to not receive the next month's payment. See the chart below for more.
If you miss a deadline, the IRS said you will get the next scheduled advance payment until the agency can process your request to unenroll. According to the IRS, currently, if you unenroll then you can't re enroll yet. Starting sometime in September, you should be able to opt back in.
Here's how to unenroll:
1. Head to the new Child Tax Credit Update Portal and click the Manage Advance Payments button.
2. On the next page, sign in using your IRS or ID.me account. If you have neither, the page will walk you through setting up an ID.me account. You'll need an email address, a photo ID, your Social Security number and a smartphone or tablet to verify your identity.
3. On the next page, you can see your eligibility and unenroll from the monthly payments.
Do I have to use the IRS Update Portal to opt out or update my information?
For now, the Child Tax Credit Update Portal is the best way to quickly make any changes that have happened since you last filed your taxes. For example, if you had a new baby in 2021 or gained a qualified dependent or if your income recently changed, the IRS wouldn't have that on file yet. Before the end of 2021, the IRS will give the portal more functionality. Right now, you can use the portal to update your banking information and mailing address. Later in the summer, you'll be able to add or subtract qualifying children, report a change in your marital status or income or re enroll in monthly payments if you previously unenrolled.
Should married parents opt out individually?
Unenrolling applies only to one individual at a time. So if you're married and file jointly, both you and your spouse will need to opt out. If only one of you does so, you will get half the joint payment you were supposed to receive with your spouse, the IRS said.
What can families who don't normally file taxes do to get child tax credit payments?
If you filed your taxes before the May 17 deadline, you should have automatically received the advance monthly payments that started July 15. An online IRS portal for nonfilers is also available for families who don't normally file income tax returns so they can register with the agency and receive payments. However, the tool has been criticized for not being easy to use -- especially on a smartphone.