- What you need to know about the advanced payments you may have received from the Child Tax Credit
- Some insight to assist your decision to opt-out or continue receiving these payments
First Advanced Payments of the Child Tax Credit
Excited about receiving a sum of unanticipated money in your account yesterday? Here are two things that are uncommonly said: it is likely coming from an unexpected payer, the IRS, and it may not be in your best interest to accept it moving forward!
The first advanced payment for the newly expanded Child Tax Credit from Biden’s American Families Plan was made this month on July 15. These advanced payments will pay out half of the total credit and will continue on a similar schedule for the remainder of the year granted taxpayers do not opt-out.
Remaining Payment Schedule
- Aug. 13
- Sept. 15
- Oct. 15
- Nov. 15
- Dec. 15
Reason to Continue Receiving Payment
For those who can utilize the extra cash flow in their current financial circumstances, it may be in your best interest to continue receiving the extra funding while it’s available; especially as it is currently expanded for only the current year of 2021.
Reasons to Opt-Out of Payments
There is a multitude of reasons that American taxpayers may choose to opt-out of these payments, we will dive into a few below. However, please note the driving force behind making this decision is to protect you from having to repay the IRS on your next tax return.
Some reasons advanced payments may need to be reconciled are:
- A recent increase in income
- The IRS will use the income listed on your 2020 or 2019 tax return (whichever was filed most recently); to determine if you are eligible for the advanced payments
- If you received a raise that makes your income exceed $75,000 as an individual (or $150,000 for married households) you will experience a phaseout of the credit, which will be reduced by $50 for every additional $1,000 earned to this brackets minimum credit of $2,000.
- Those with an AGI greater than $200,000 ($400,000 for those married and filing jointly) will face a further phaseout of the credit which will subtract $50 for every additional $1,000 earned.
- You no longer claim your children as dependents
- This can fall true for many circumstances; most commonly an ex-spouse
- You are concerned about overpayment
- This could be due to several reasons such as a child aging out entirely, out of the higher credit age range, as well as a multitude of other reasons
Opting Out of Advanced Payments
The IRS Child Tax Credit Update Portal is open for those who are looking to opt-out of the advanced payments for the Child Tax credit; however, a more detailed outline can be found on our website to assist you in this process.
Still concerned about having to reconcile overpayments with the IRS next year? Speak with one of our tax experts by giving us a call at 516-541-6549 and visit our website.