Advanced Child Tax Credit Payments – You may want to Opt Out
In June, the IRS sent letters regarding advance payments of the Child Tax Credit (CTC) to potentially eligible taxpayers. For 2021 only, the CTC increases to $3,000 per child between the ages of 6 and 17, and $3,600 per child under the age of 6. From July to December 2021, those eligible will automatically receive 6 even monthly payments totaling 50% of their CTC. The other 50% of the CTC will be claimed on the 2021 tax return. Note, this is NOT a fourth round of stimulus checks.
The credit applies to individual taxpayers with income below $150,000 for joint returns or single filers with income below $75,000. Eligibility for the advance payments will be calculated based on your 2020 tax return. If you are eligible, expect to receive $300 for each child under 6 and $250 for each child age 6 through 17, monthly through the end of the year.
No action is required for eligible taxpayers to begin receiving the payments. However, if you receive the advance payments, and your eligibility for the CTC amount changes based on your 2021 circumstances, you will have to pay the advance payments back with the filing of your 2021 tax return. You can elect to opt out of receiving the advance payments. Some reasons you may want to consider electing to opt out include:
- Your 2021 income increased over your 2020 income, putting you over
the phaseout of $150,000 or $75,000.
- You typically owe money when you file your taxes or break even every year.
- You are a divorced parent that alternates the years in which you claim your children as dependents.
- You had a dependent child in 2020 that is no longer a dependent in 2021.
- You plan to live outside of the U.S. for more than half of 2021.
The IRS has created two portals on the IRS.gov website to help manage the advance payments:
- Make changes in the number of children, income, or bank account
information during 2021, visit the IRS website
- Opt out of the advance payments. Once you unenroll from receiving the advance payments, you cannot re-enroll at this point. For joint taxpayers, both you and your spouse will need to unenroll in order to opt out. Payments begin in mid-July, to opt out of future payments complete the steps below by August 2:
If you have a specific question about your circumstance, please give Kirsch CPA Group a call!
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