Many Americans are excited to receive a $250 or $300 extra deposit in their bank. However, be warned that this money might be revoked by the government some time next year. It means that you'll have to pay back the money through tax payment! Here are significant reasons why you should opt-out of the child tax credit.
Free money from the child tax credit is supposed to be good news for families across the US. However, this could actually create big problems for others, especially next year. Save yourself the headache of debts and complaint files by checking if you qualify for the child tax credit.
5 Reasons to Opt Out of Child Tax Credit
5. IRS Child Tax Credit Tracker
Keep in mind that the Internal Revenue Service (IRS) sent the child tax credit money based on your latest tax filing. This could be information based on 2019 or 2020. These payments are automatically deposited in your bank or delivered to your home address.
However, the money you could actually claim is based on your 2021 tax returns! Big changes that happen this year will directly affect your eligibility. NPR listed below some examples.
4. Your Income Went Up by 2021
For example, you lost your job in 2019, earning below $75,000. You forgot to file your 2020 tax returns. However, you are promised a job in September, earning $85,000 for your family.
Based on your 2019 tax returns, IRS will automatically send you child tax credit payments (250-300 monthly until December). However, payments starting September would be considered an overpayment. When your information is updated on the 2021 tax returns, overpaid money would be reclaimed by the government.
3. Your Dependent's Age
IRS provides $300 per month for children under 6 and $250 per month for dependents ages 6-17. IRS calculates the child tax credit money based on their age by December 31, 2021. If your child turns to 6 anytime this year, you should only qualify for $250 payments.
2. You Are Divorced
Child tax credit payment is budgeted per dependent. If two divorced parents claim the same child on separate child tax credit programs, one of them will have their payments reimbursed. This specifically depends on who has official custody of the child in 2021.
1. You Want to Claim the Money in Lump Sum
Families who prefer to receive the child tax credit money in a $3,600 lump sum should opt-out of the monthly recurring payments right now. Note, however, that eligibility for the money, such as your adjusted gross income (AGI) and child's age, would be based on the 2021 tax returns information.
How to Opt Out Child Tax Credit Now
To opt-out of the child tax credit monthly payment, you need to create your own ID.me account. This account also lets you update the IRS about information like
- Current income
- Declare new dependents
- Update Mailing address
- Update Bank Information.
- Monitor the child tax credit amount
Full details on how to create an ID.me account are available in this article.