3 Reasons to Opt Out of the Child Tax Credit Payments

The IRS will be issuing advance payments of the child tax credit through December.  Eligible families will receive $300 per child aged 5 and under or $250 per child aged 6-17.  While some taxpayers are welcoming the payments with open arms, others rather wait until spring to claim the full credit.  Here are some reasons to consider opting out of the monthly payments and how to unenroll.

You’d rather get a large tax refund

Many people look forward to getting a large refund at tax time.  They use the lump sum of cash to pay off debt, build their savings, make a major purchase or achieve some other financial goal.  For 2021 the child tax credit is worth more money and is fully refundable.  Eligible families can get up to $3,600 per child depending on their age.  So, instead of getting half of the credit now and the rest when they file, they’d rather wait until tax time to claim the full amount.

You usually owe money

Some people don’t pay enough taxes during the year and wind up with a balance due when they file their return.  If you usually owe the IRS, consider opting out of the advance payments.  Waiting to claim the credit can help minimize what you owe.

Your tax situation has changed

The advance monthly payments are estimated using the information on your 2020 or 2019 tax return, whichever was filed most recently.  When you file your taxes in 2022, your actual credit will be calculated using your 2021 tax information.  If your tax situation has changed (you got married, your dependent is no longer eligible, you earned more money, etc.), there’s a possibility that you may receive a bigger payment than you’re entitled to and end up owing money at tax time.  It’s also a good idea to opt out if you share custody of your child and alternate the years you claim them on your taxes.

How to unenroll from the advance payments

To opt out of advance payments of the child tax credit, you’ll need to use the “Child Tax Credit Update Portal” on the IRS website.  You’ll need an IRS or ID.me account to use the tool.  If you have neither, you’ll need to have a photo identification ready so they can make sure it’s really you.  You must unenroll by the deadline otherwise you’ll receive your next payment as scheduled.  If you’re married filing jointly, both spouses must opt out.  If you do decide to opt-out, make your decision carefully because there’s currently no way to re-enroll after you opt out.

Deadline for opting out