Written by Don Huff, CPA
The latest Stimulus Payment being offered to qualifying taxpayers is the prepayment of a portion of the Child Tax Credit for the 2021 tax year starting July 15.
The new law temporarily raises the amount of the credit for a qualifying child. Children ages 5 and younger will receive credits worth $3,600, and children from 6 to 17 will each receive $3,000. The prepayment for the rest of 2021 is that families can expect to receive $250 per month for kids over the age of five and $300 per month for each child five or younger. However, there are income limits that need to be met for 2021 in order to qualify for such:
- Single taxpayers with an annual income of $75,000 or less, heads of households earning $112,500 or less, and married couples with an income of $150,000 or less qualify for the full credit.
- Those with higher incomes receive reduced amounts until the tax credits are phased out entirely.
- Families that earn too much to qualify for the Advanced Child Tax Credit are still eligible for the regular tax credit, currently at $2,000 per child under the age of 17 by Dec. 31, 2021.
There is a chance that circumstances have changed and the taxpayer will not qualify for the prepayment and amounts will need to be paid back to the IRS. As a result, taxpayers are being provided the opportunity to Opt-out of the Advanced Child Tax Credit.
Some reasons for opting out of the monthly child tax credit payment program may be a good idea:
- You would rather receive one large payment next year instead of seven smaller payments spanning 2021 and 2022.
- You know your household circumstances or tax situation will change and don’t want to deal with having to update your information with the IRS.
- You are concerned that the IRS will send you prepayments that you may not qualify for and you don’t want to worry about paying that money back next year.
For those taxpayers that have missed the July 15 deadline for opting out, there is still an opportunity to opt-out. Due dates for Opt Out are as follows:
|Payment month||Unenrollment deadline||Payment date|
|August||Aug 2||Aug 13|
|September||Aug 30||Sep 15|
|October||Oct 4||Oct 15|
|November||Nov 1||Nov 15|
|December||Nov 29||Dec 15|
To opt out, you’ll have to use the Child Tax Credit Update Portal on the IRS Website. If you opt out of the advance payment program this year, you’ll claim the full amount when you file your tax return in 2022.
While many households consider the advance tax relief this year to be beneficial, there may be several reasons why unenrolling is a good idea for others.