DALLAS — It seems strange to turn down a pile of cash, especially if that pile is expected to keep coming. But for some parents, the new monthly Advance Child Tax Credit payments that started in July and continue through the end of the year may not be the best idea.
Some of you are still sending me questions about this. First, here are some basics: For each child 5 years old or younger, the credit is $1,800 (paid out in six monthly payments of $300). For each child ages 6 to 17, the credit is $1,500 (paid out in six monthly payments of $250). The credit was increased by the federal government to help struggling families during the pandemic. But there are income requirements for the additional benefit.
The credit has the word advance in front of it is because in an effort to provide enhanced help to families earlier than they would normally get it. Usually, parents would have to wait until they file taxes in 2022 to claim the full credit. Note: If you receive the advance child tax credit payments, when you file taxes in 2022, you will only be eligible to claim the other half of the full amount of your child credit that you haven’t yet received.
Parents don’t have to do anything specific to receive the early payments, which started in July and continue through December. As long as you filed a 2019 or 2020 tax return, the IRS has information to include you in the automatic payments if you are eligible. You can click here to check your eligibility, enter your information in case you didn’t file your 2019 or 2020 taxes, or opt out of the early payments.
Why would you decline the money?
Some taxpayers might have reason to unenroll from the early payment program. For instance, if a parent usually ends up owing money each year when they file their taxes, taking part of the child credit now may cause them to owe more money when they do their taxes next year.
Parents with higher Adjusted Gross Incomes may have to pay back some of the money as well. Kiplinger recently published an article about that.
Some people say they've had issues opting out. Here are some potential sticking points
If you and your spouse file jointly, both of you must opt out of the early payments to prevent a payment from arriving.
And there is a deadline. You must decline the payments by 11:59 p.m. Eastern Standard Time, three days before the first Thursday of any given month. That part may explain why some who tried to turn down the payments got the July installment anyway. If you made your request after the deadline, your payments should stop the following month.
If you opt out, the IRS recommends you check back to make sure you successfully unenrolled. It can take up to seven calendar days. And the agency expects to have a feature available in September that will allow parents who have opted out to opt back in.
If you haven’t opted out yet, but you don't want any more of the early child tax credit payments -you have until 11:59 p.m. EST (10:59 Central Standard Time) on Aug. 2.