Parents are opting out of monthly child tax credit payments. Here are 3 reasons why – CNET

Many parents have been talking about unenrolling from the advance monthly child tax credit payments this year. Of course, some families need the extra money upfront to cover bills now and don’t want to wait to get it. But what if you were counting on the credit coming with a bigger tax refund in 2022 instead? Or what if you’re worried that you’re no longer eligible and don’t want to owe the IRS? You still can opt out for the September through December monthly payments, which could be up to $300 per kid. 

Remember, you won’t be turning down the credit, you’ll just be putting off when you get it. First, think about whether your household details might be different this year, or if you are saving for a large expense. The IRS bases your advance payments on older tax information, either from a 2020 or 2019 return, and a lot has changed since pre-pandemic times. Also know that these advance payments are not a tax deduction, but an actual cash credit, and they won’t count as income on your tax return.

The second advance payment for August has already been issued. But you can still unenroll by Monday, Aug. 30 before the September check and the rest of 2021 payments. We’ll tell you all the unenrollment deadlines below. The key to managing your child tax credits is the IRS Update Portal, which first requires setting up an ID.me account. If you decide to use the advance payments to cover expenses now, here are some ways to spend your child tax credit money. This story was updated recently. 

3 reasons to opt out of monthly child tax credit payments

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 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. 

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How to unenroll from the monthly payments

If you want to unenroll, you have until 9 p.m. PT on Aug. 30. You can opt out anytime in 2021 to stop receiving the rest of your remaining monthly advances, even if you’ve already received payment. To unenroll, the IRS said you must opt out three days before the first Thursday of the month in order to not receive the next month’s payment. See the chart below for more. 

If you miss a deadline, the IRS said you will get the next scheduled advance payment until the agency can process your request to unenroll. According to the IRS, currently, if you unenroll then you can’t reenroll yet. Starting sometime in September, you should be able to opt back in.

Here’s how to unenroll:

1. Head to the new Child Tax Credit Update Portal and click the Manage Advance Payments button.

2. On the next page, sign in using your IRS or ID.me account. If you have neither, the page will walk you through setting up an ID.me account. You’ll need an email address, a photo ID, your Social Security number and a smartphone or tablet to verify your identity. 

3. On the next page, you can see your eligibility and unenroll from the monthly payments. 

Both parents need to opt out separately if they’re married

Unenrolling applies only to one individual at a time. So if you’re married and file jointly, both you and your spouse will need to opt out. If only one of you does so, you will get half the joint payment you were supposed to receive with your spouse, the IRS said.

What opting out now means for tax season in 2022

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 income meets the requirements, 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 to claim missing stimulus checks this 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. 

You can use our child tax credit 2021 calculator to estimate how much you should get and see a breakdown of the monthly payments if you choose not to opt out and meet all eligibility requirements. 

Parents who don’t file taxes can still get the credit this year

If you filed your taxes before the May 17 deadline, you should have automatically received the advance monthly payments that started July 15. An online IRS portal for nonfilers is also available for families who don’t normally file income tax returns so they can register with the agency and receive payments. However, the tool has been criticized for not being easy to use — especially on a smartphone. 

The IRS portal will let you update other household details

The Child Tax Credit Update Portal will also let you add any changes that have happened since you last filed your taxes. For example, if you had a new baby in 2021 or gained a qualified dependent or if your income recently changed, the IRS wouldn’t have that on file yet. Before the end of 2021, the IRS will give the portal more functionality. Sometime this month, you’ll be able to update your mailing address. Later in the summer, you’ll be able to add or subtract qualifying children, report a change in your marital status or income or reenroll in monthly payments if you previously unenrolled. 

For more child tax credit information, here’s what to know about the child tax credit payment timeline and how to estimate your total payment using CNET’s child tax credit calculator. 

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