Advance Child Tax Credit – Opt in or out?
Should you opt in or out of the Advance Child Tax Credit? There is no right answer, as it is dependent on your situation. There are new online tools to help families manage and determine which is right for them. These decisions should be based on your income and whether you want your Tax Credit spread out over time or in a lump sum when you file your taxes. Below is information that could assist you in those questions.
The American Rescue plan increased the maximum Child Tax Credit amount in 2021 to $3,600 per child for children under the age of 6 and to $3,000 per child for children ages 6 through 17. It’s also now an advanceable payment (i.e., instead of waiting for the refund when filing taxes, you get it early), and automatic payments for eligible families will start on automatically July 15, 2021.
In a letter currently being sent to taxpayers, the IRS has explained that taxpayers don’t have to do anything to begin receiving the Advance Child Tax Credit (ACTC) payments (assuming they are otherwise eligible to receive the CTC) for 2021. The letter also states that taxpayers may choose to opt out of receiving the advance payments by June 30th.
To help families sign up for this advanceable credit, or to opt out, the IRS launched several new online tools designed to help families manage and monitor these payments:
- Child Tax Credit Eligibility Assistant – allows families to answer a series of questions to quickly determine whether they qualify for the advance credit.
- Child Tax Credit Update Portal – allows families to verify their eligibility for the payments and if they choose to unenroll, or opt out, from receiving the monthly payments so they can receive a lump-sum when they file their tax return next year.
- Non-filer Sign-up Tool – helps families not normally required to file an income tax return to quickly register for the Child Tax Credit and Economic Impact Payments.
For the most up-to-date information on the Child Tax Credit and advance payments, visit Advance Child Tax Credit Payments in 2021.
Posting Date June 25, 2021