Most people who qualify for the advance child tax credit have automatically enrolled, but many people still aren’t fully aware of the tax implications. If you’re not careful, you could end up owing the credits back to the IRS when it comes time to file your 2022 income taxes.
Keep reading to learn more about the Advance Child Tax Credit and whether you should consider opting out of these payments for the last few months of 2021.
What Is the Advance Child Tax Credit?
The Child Tax Credit is a helpful program that pays out thousands of dollars to taxpayers for every qualifying child under the age of 17 they claim. This money comes in the form of an actual cash payment, not a deduction, which can be a major help with the daily necessities of life.
In July of 2021, the IRS began paying half the total credit amount in advanced monthly allotments. Eligible taxpayers will receive the other half when they file their 2021 tax returns. As of now, the Advanced Child Tax Credit applies only to 2021.
Eligible children must be a son, daughter, stepson, stepdaughter, descendent of the above, or foster child. They must also be under the age of 17, and you must be able to claim them as a dependent on your taxes. Also, all adopted children qualify as either a son or daughter.
It’s extremely important to note that if you filed taxes in 2020 and completed the Schedule 8812 Additional Tax Credit form, listing eligible dependents under the age of 17, you were likely automatically enrolled in the Advance Child Tax Credit program. For many, this was a helpful and convenient way to receive supplementary money during a difficult time. However, as we near the end of 2021 and look toward the 2022 tax season, it’s time to reconsider if these funds are still a good option for you and your family.
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When to Consider Opting Out of the Advance Child Tax Credit Payments
If you choose to opt out of the Advance Child Tax Credit payments for the rest of the year, that doesn’t mean you won’t receive the money. Instead, it just means that you won’t receive the remaining funds until you’ve filed your 2022 tax returns.
If any of the situations below apply to you and your family, you should unenroll from the remaining Advance Child Tax Credit payments and contact a proven and reliable tax lawyer.
- You’re Concerned About Receiving an Overpayment: Having to pay back the IRS for an overpayment of any kind can be a major hassle. So if you’ve received a significant raise or if a child dependent has entered a new age bracket for the Child Tax Credit program, speak with an experienced tax attorney to unenroll from the program for the remainder of 2021.
- Your Household or Tax Situation Is About to Change: If your tax situation or household circumstances have recently changed or will be changing soon, you should consider opting out to avoid potential issues with overpayment or underpayment.
- You Want One Large Payment: If you’re looking to make a major purchase in 2022, it might be wise to let the IRS hold onto that money for you. Or, if you’re simply trying to set a manageable budget to pay off an existing debt, you should wait for the IRS to send you a lump sum to satisfy or reduce what you owe in a single payment.
How to Opt Out of the Advance Child Tax Credit
If you’ve decided to opt out of the Advance Child Tax Credit, you will no longer receive monthly payments. Instead, you will receive the remainder of what is owed when you file your 2021 tax returns this coming spring. Also note that you do not have to repay any of the advance money the IRS has already paid you. However, the deadline to opt out for the remaining three months of the year is October 4, so you should make a quick and considered decision.
To unenroll from the program, visit the Child Tax Credit Update Portal, click the “Manage Advance Payments” tab, and sign in using your IRS account. If you don’t have one, follow the instructions on the page to create an ID.me account. To do so, you’ll need a photo ID, your Social Security Number, a smartphone (to verify your identity), and an email address. Once that’s done, you’ll be able to check your eligibility and opt out of the program.
You can also use this portal to update your number of dependents, financial and contact information, income, and marital status. If you are married and file jointly, be sure that both you and your spouse unenroll from the program.
Contact S.H. Block Tax Services to Avoid Costly Child Tax Credit Mistakes
If any of the above tax scenarios sounds familiar or might apply to you and your family, you should reach out to a skilled and reputable tax attorney to help you avoid potential pitfalls while getting the most out of your tax returns.
At S.H. Block Tax Services, our knowledgeable lawyers, bookkeepers, and enrolled agents have the experience you need to minimize tax liabilities and keep more of your hard-earned money. Regardless of your tax or financial situation, we’re confident we can help set you on the right path.
To learn more about our firm and receive a free consultation, please call (888) 884-8686 or complete this brief form today.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.