Should You Opt Out of Monthly Child Tax Credit Payments? What You Need to Know
By delaying your monthly child tax credit, you could get it all at once next year
Monthly child tax credits will be going out to millions of parents in a few short weeks, but there are a few reasons you may want to delay those payments for now.
The Internal Revenue Service will begin disbursing the credit on July 15, officials announced this week. The payments, which will be available to about 39 million households, are part of President Joe Biden's American Rescue Plan, which aims to jump-start the economy following the peak of the COVID-19 pandemic in the U.S.
Payments will be made on the 15th of each month to December unless it falls on a weekend or holiday, and eligible families will receive up to $300 per month for each child under age 6, and up to $250 per month for each child age 6 and above, the IRS explained.
The maximum amount families will receive are $3,600 for children under the age of 6 and $3,000 per child for children between ages 6 and 17.
But there is the option to opt out of receiving the monthly payments.
As Acorns explains, by delaying your payments, you could receive one large payment next year. For example, families who receive $300 monthly payments from July to December should be able to receive the rest of their eligible maximum amount — $3,600 — once they file their taxes in 2022.
By delaying the monthly payments, the families could go the rest of the year knowing they'll likely have a hefty amount of money waiting for them in 2022.
"There's evidence that shows that some people really like getting that large tax refund, and can use it as an opportunity to purchase a large household item like a refrigerator or put together first and last month's rent so they can move," Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, told CNBC.
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The full child tax credit payment would arrive with their tax return next year. But, as CNET explains, the pending payment could also be used to make up for any taxes you owe at that time.
CNET also says parents may want to delay the payments if they feel their circumstances could change or are concerned the IRS could send an overpayment they'll have to return.
Those who wish to opt out of the monthly payment will have to use an IRS website that should be available by July 1, according to CNET. If you don't make any changes on the website and have already filed your taxes by May 17, the credit will automatically be sent as a monthly payment.
The organization will also make paper forms available for anyone who doesn't have internet access, Acorns said.
"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," the IRS explained on their website last week. "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."