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The IRS on Tuesday started an online tool that will allow families to tell the agency they don’t want to receive advance monthly payments from the enhanced child tax credit, scheduled to start next month.
Using the new Child Tax Credit Update Portal, families can verify that they’re eligible for the credit and unenroll from the advance portion, meaning they won’t get the monthly payments set to start July 15 and continue through December. Instead, they’ll receive the entire credit as a lump sum when they file their 2021 tax return next year.
The enhanced child tax credit was part of the American Rescue Plan signed into law by President Joe Biden in March. The credit increases to $3,000 from $2,000 per child under the age of 17 and gives an additional $600 benefit for children under the age of 6 for the 2021 tax year.
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Monthly child tax credit payments start July 15. What to know
The full credit is available to all children ages 17 and under in families with 2020 or 2019 adjusted gross income of less than $75,000 for single parents and $150,000 for a married couple filing jointly, and ends for individuals earning $95,000 and married couples filing jointly making $170,000, though they’d still be eligible for the regular child tax credit.
Why some families may opt out
Opting out of receiving half of the credit in advance monthly payments makes sense for some families, especially those that may owe the IRS and want to use the credit to offset a tax bill.
In addition, some families with separated parents who share custody may alternate who claims children on their taxes each year. If the parent who claimed dependents in 2020 (or 2019) isn’t the one who will claim them in 2021, they can unenroll to ensure the credit goes to the correct guardian.