The I.R.S. began disbursing the Child Tax Credit advance payment checks in July.
You may be one of those taxpayers who received this first check.
On the flip side, you could have chosen to opt-out.
There are pros and cons to both decisions.
But, opting-out is most likely the best option for certain groups of people.
I’ll explain who these people are in this article.
Key Takeaways
The Child Tax Care Credit is not free money.
There are four groups of people who should opt-out of receiving advance payments.
You can opt-out of the advance payments by visiting the IRS website.
What Does The New Child Tax Credit Mean?
Parents can use the new Child Tax Credit to lessen their taxes. The amount disbursed depends on the child’s age. The maximum you can receive is $3,600 per child.
You aren’t getting free money. Tax credits are used to offset the amount you owe on your tax return. So, you can use them to help you pay less taxes.
If you take the advance payment now, you’ll have less tax credits when you file your tax return for 2021. So, the advance payment isn’t the best option for everyone.
Who Should Opt-Out Of The Child Tax Credit Advance Payments?
Opting-out of the advance payments is ultimately your decision. But, I believe there are four groups of people who should opt-out. Taxpayers who:
Didn’t get stimulus checks in 2020 due to high income
Normally owe and would rather get the full credit when they file their tax returns
W2 earners who started owing taxes in the past three years due to changes in withholding tables
Share custody of children
Learn more in my Youtube video.
Photo by Alexander Dummer on Unsplash
How To Opt-Out Of The Child Tax Credit Advance Payments
Click the button below to watch my Youtube video for the step-by-step process. Here’s a list of the steps:
Set up your IRS account and sign in (just sign in if you already have an account).
Click "Credits and Deductions."
Click "Advance Child Tax Credit."
Click "Manage Your Payment".
Click "Opt-Out".
Answer the questions.
You may have already received the first advance payment. That doesn’t mean you can’t opt-out.
Follow the steps and opt-out by August 2, 2021 if you don’t want to receive anymore checks for the rest of 2021. You’ll then get your Child Tax Credit as a lump-sum when you file your 2021 tax returns.
If you’re married and want to opt-out, both you and your spouse must complete the process. Only one person can opt-out at a time.
Final Words
The Child Tax Credit advance payments aren’t for everyone. Your decision to opt-out depends on you. Think carefully about the effect these advance payments will have on your 2021 tax returns.
Remember:
The Child Tax Credit is meant to offset the amount you owe on your tax return.
It’s easy to opt-out of the advance payments.
You don’t have to opt-out, but pay close attention to your tax planning so that there aren’t issues with your 2021 tax returns.
All hope isn’t lost if you’ve already received your first advance payment. You can still opt-out before August 2, 2021. Feel free to reach out to me if you need help.
Watch my Youtube video for more details about opting-out of the Child Tax Credit.