Part 2: Opting Out of the 2021 Advance Child Tax Credit
While the advance payments will begin to be disbursed automatically, qualifying families can opt-out of them and receive the entire tax credit as a lump sum when filing their 2021 taxes. If opting out, the entire $3,000-$3,600 credit will be received with their 2021 tax return, instead of receiving 50% of the entire credit amount in advance monthly installments beginning July 15 and the remaining 50% as a lump sum with their tax return. Opting out doesn’t change the amount of money you will receive; it just changes when you will receive it.
You may desire to opt-out of the smaller monthly payments for your own personal financial reasons. Maybe you are less apt to spend the credit on impulse buys if you receive a larger sum at once rather than a few hundred dollars per month. Deferring payment until the 2021 tax season may be a smart financial planning option if you are anticipating a high tax bill next year or other large expenses later on. You may also want to avoid the potential risk of having to pay back the IRS later on in the event they make any overpayments to you during the 2021 monthly installments.
Because the advance payments will start automatically for qualifying families, proactive steps must be taken to defer payment. The IRS is going to release what it has called the “Child Tax Credit Update Portal” where families can opt-out of the advance payments. The portal is set to become available at the beginning of July. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regards to the 2021 Child Tax Credit. Please contact us at (618) 997-3436 for more information.