The next check is scheduled to arrive on Sept. 15, but it’s too late to opt out. But there’s still time if you’re thinking about unenrolling from the upcoming child tax credit (The next deadline is Oct. 4). You can opt out each month if your circumstances change during the rolling advance payments. If you choose to unenroll now you’ll get the rest of the money during tax time next year. Opting out is also a good way to avoid repaying the IRS next year if you don’t qualify for advance payments.
There are some big changes to this year’s credit. First, Some parents are getting up to $300 per kid per month instead of waiting until tax time. But parents must qualify for the advance money. The IRS is basing eligibility on 2020 tax returns, and a lot could have changed since then, so opting out may be the best option if you’re ineligible. The advance payments aren’t a tax deduction but an actual cash credit, and they won’t count as income on your tax return. So you won’t be turning down the credit if you opt out, you’ll just be delaying when you get it.
If you decide to unenroll, you’ll first need to set up an ID.me account. There are a lot of changes from last year’s child tax credit that we’ll explain, including how to opt out ahead of October’s check. And if you decide to keep the advance payments rolling, here are some ways to spend your child tax credit money. This story was updated recently.
3 reasons parents should consider opting out
Here are some cases where unenrolling from the 2021 advance child tax credit program could be a good idea:
- You’d rather have one large payment next year instead of seven smaller payments spanning 2021 and 2022. This could be the case for families saving up for a big expense, those who’ve budgeted that money to pay off outstanding debt or those who are accustomed to getting a bigger refund at tax time.
- You know your household’s circumstances or tax situation will change (or they’ve already changed) this year and don’t want to deal with having to update your information in the IRS portal. This could be the case for divorced parents who alternate custody of a child.
- You’re concerned the IRS might send you an overpayment based on old tax information from 2020 or 2019, and you don’t want to worry about paying any of that money back next year. That could be the case if your household income goes up because you’ve returned to work or got a new job. It could also be the case if a dependent you claimed previously is aging out of an age bracket before the end of 2021.
What happens if parents opt out now?
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, 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 tothis 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. ReadMore
Source : cnetShare: