What happens if I don’t want to receive the $3,000 or $3,600 Child Tax Credit Monthly payments?
It is too late to stop the July payment of the 2021 Child Tax Credit, but parents that wish to receive the rest of the credit due as a lump sum have time.
The Internal Revenue Service sent millions of families the first installment on the 2021 Child Tax Credit on Thursday. Five more installments will go out each month until December unless parents decide to opt out of the advance payments.
The six payments in 2021 from the IRS represent half of the greatly enhanced Child Tax Credit. Eligible parents can claim up to $3,600 for each of their children under six and $3,000 per child six to 17 years of age this year. The remainder of the credit that families are eligible for can be claimed in 2022 through filers' tax returns.
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Enhancements to the Child Tax Credit for the 2021 fiscal year
The revamped Child Tax Credit raised the eligible age for children to 17 and dropped the $2,500 earnings floor, above which a parent could claim a gradually larger portion of the previously $2,000 credit. The previous credit was also only partially refundable, now the whole credit can be claimed as a tax refund if a filer doesn’t owe more in taxes than the credit, or sum of all credits they qualify for.
The changes were included in the American Rescue Plan, the sweeping piece of legislation that Democrats enacted in March which provided additional covid-19 relief and stimulus for US families and the economy. The program, besides providing basic income for parents to improve children’s lives, is a large tax cut to around 39 million American households according to IRS estimates.
The advance Child Tax Credit payments are not stimulus checks
Like the Economic Impact Payments, better known as stimulus checks or stimmys, the latest payments the IRS is sending are advances on the enhanced tax credit. Unlike the stimulus checks, if the IRS over pays you, that money will be taken out of your tax refund or even out of your pocket. For that reason, some families may want to opt out receiving the advance payments, especially in the case that you are expecting to owe taxes on 2021 income.
Parents that haven’t already chosen to unenroll from the advance payments can’t stop the July payment, but do have until 2 August to stop the next monthly installment on the 2021 Child Tax Credit along with the rest. Should you change your mind after cancelling the advance payments you will have to wait until late September to restart the monthly payments, the IRS hasn’t had the time and resources yet to set up that option.
What happens if you don’t want to receive the Child Tax Credit monthly payments?
Stopping the advance 2021 Child Tax Credit payments simple leaves the remainder of the credit that your family is eligible to receive on the table to claim next year when you file a tax return. Depending on your tax liability for 2021 and the other tax credits that you can claim you could be looking at receiving a larger tax refund. If you owe less in taxes than the amount of credits you can claim the balance will be sent to you as a tax refund.
The American Rescue Plan also expanded the Earned Income Tax Credit and the Child Dependent Care Credit which families will want to examine before they file their 2021 tax return next year.