Monday is the last day to opt out of the first child tax credit payment. What to know
Families who want to receive the full child tax credit as a lump sum need to opt out of monthly payments Monday.
The temporarily enhanced child tax credits provide eligible families with up to $3,600 per child in benefits over the course of a year. The first half of the credits will go out as monthly payments of up to $300 through the end of the year, and the second half can be claimed when filing income taxes for 2021.
But families have the option to forgo the monthly payments and collect the full credit when they file their taxes.
The first direct payments are set for July 15, and families who want to skip that payment and all future monthly payments need to unenroll from them by 11:59 p.m. EDT Monday, June 28, the Internal Revenue Service says.
Parents who miss that deadline will receive the July 15 payment but can opt out of future direct payments. They must do so at least three days before the first Thursday of the following month, the IRS says.
How to opt out of the monthly payments
Parents can unenroll from the direct payments using the Child Tax Credit Update Portal, which can be found here.
Users will need to create an IRS username or ID.me account if they don’t already have one. Those who don’t have one will need to have a photo ID. Parents who don’t have internet access can unenroll by calling the phone number included in their “outreach letter,” according to the IRS.
It may take several days for the unenrollment request to process, and the IRS recommends checking back to make sure the request was “processed successfully.”
For those married and filing jointly, both spouses will need to opt out, the IRS says, as “unenrolling applies to the individual only.” If one spouse unenrolls and the other doesn’t, they will receive half the joint payment they were supposed to receive with their spouse.
Once families opt out of the direct payments, they cannot opt back in yet.
“Unenrollment is a one-time action,” the IRS says. “You will be able to re-enroll starting in late September 2021.”
Deciding whether to opt out
The IRS says there are several reasons families may choose not to receive the monthly payments.
Parents may want to opt out of the advance payments if they expect the amount of taxes they’ll owe to be more than their expected refund when they file their 2021 tax returns in 2022, the IRS says. The IRS says that by accepting the advance payments, the refund may decrease or the amount owed may increase.
“You may avoid owing tax to the IRS if you unenroll and claim the entire credit when you file your 2021 tax return,” the IRS says.
Some families may also choose to opt out because they would benefit more from a larger lump sum instead of smaller, monthly payments or because the monthly payments would “throw off” their tax planning, CNBC reports.
Additionally, opting out of monthly payments may be the best choice for some parents who are separated and alternate who claims their children on their tax returns each year, CNBC reports.
About the child tax credit
The temporarily enhanced credits were included in the $1.9 trillion American Rescue Plan, the COVID-19 relief package signed into law in March.
Eligible families will receive $3,600 per child under age 6 and $3,000 per child ages 6 to 17 in benefits.
Single parents earning up to $75,000 a year and couples earning up to $150,000 a year are eligible for the full benefit. Benefits are phased out after that.
Families can check whether they are eligible using the Child Tax Credit Eligibility Assistant, which can be found here.
