May 16, 2021
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The IRS announced last month that the enhanced Child Tax Credit will take the form of monthly payments to parents, which will start in July, but some parents might want to opt out of it.
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The monthly payments would translate into approximately $250 to $300 for parents, who should start thinking about how to use it now, according to several experts.
According to CNET, reasons that parents might want to opt out of it include if you’d rather have one large payment next year, if you know your circumstances will change and don’t want to deal with updating your information in the portal the IRS plans to open by July 1, or if you’re concerned the IRS might accidentally send you an overpayment and you don’t want to worry about paying that money back.
However, CNET warns that Americans who opt out of receiving monthly child tax credits from July through December, won’t get a full payment — or any payment at all — until after the IRS processes the 2021 tax return next year.
“The full payment will then arrive with your tax refund, or could be used to offset any taxes you owe; you’ll be in a similar situation to those people who had to claim missing stimulus checks on their taxes this year,” according to CNET.
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The IRS said it will open a portal for the new child tax credit payments. “Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon,” the IRS said on its website.
The Treasury Department explains that the existing Child Tax Credit has been revised in the following ways:
The credit amount has been increased from $2,000 to $3,600 for children under age 6 and to $3,000 for children ages 6 to 17. Previously, the credit only applied to children ages 16 and younger. Individuals eligible for a 2021 Child Tax Credit will receive advance payments on their credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1 to Dec. In addition, the credit is now fully refundable and has been extended to Puerto Rico and the U.S. Territories.
The Treasury added that it has required the IRS to establish an online portal for taxpayers to update relevant data for mid-year payment adjustments — for example, the birth of a child during 2021.
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This article originally appeared on GOBankingRates.com: You May Want to Opt Out of Monthly Child Tax Credit Payments – Here’s Why