CHILD TAX CREDIT

IRS Child Tax Credit portal: how can I use it to opt out?

The IRS has already started sending monthly payments to eligible parents but some have unenrolled from the new system to receive a single annual credit instead.

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IRS Child Tax Credit portal: how can I use it to opt out?

On 15 July the IRS started making payments as part of the reformed Child Tax Credit, which will see parents receive a monthly direct payment for the first time

An estimated 88% of American children will be covered by the expanded programme, worth up to $300 per child, and it is hoped to halve childhood poverty over the next 12 months.

In a statement released to publicise the new system, President Biden said the new Child Tax Credit payments would “give our nation’s hardworking families with children a little more breathing room when it comes to putting food on the table, paying the bills, and making ends meet.”

However parents can also decide to receive the money as a single annual payment if they prefer. They will instead receive their full entitlement as a lump sum tax credit at the end of the year and they will avoid the risk of having to repay the money if they experience an income increase before the end of 2021.

IRS introduces online portal to control your Child Tax Credit payments

As has been the case with the three rounds of stimulus checks, the Child Tax Credit distribution process will be overseen by the IRS. To help streamline the mammoth national effort, the tax authority has introduced two new online portals to allow parents to control their payments.

In the past the Child Tax Credit has been made available in a lump sum when they filed their taxes, and that can still be requested using the new system. The Child Tax Credit Update Portal gives parents the option of unenrolling from the monthly payments.

Simply sign in to the portal using your IRS username or ID.me account (the page allows you to create one if you don’t currently have one) and select Manage Advance Payments in the menu. From there you will be able to opt out of the monthly payments.

Bear in mind that there are a series of deadlines for opting out before the next round of payments is sent. If you do not want to receive the mid-August payment, you must have unenrolled from the monthly payments by 2 August.

Why would some parents want to opt out of the Child Tax Credit monthly payments?

Many parents have got used to having the Child Tax Credit when it comes to filing season every year, knocking thousands of dollars of their tax bill and potentially adding to their refund if they are in line to receive one. With so much economic uncertainty at the moment they may choose to withhold the payments for now in case they are needed later.

Opting out of the monthly payments will also eliminate the risk having to pay back a proportion of the monthly payments if you report an increase in household income in your next tax filing. Eligibility for the Child Tax Credit is based on last year’s tax filing, but if your earnings are higher than expected you may no longer be eligible and the IRS will request that you pay the money back.

For more details on this, check out our guide on Avoiding Child Tax Credit Repayments.