Monday is the next deadline to unenroll from the monthly child tax credits, the fourth installment of which is slated to go out in mid-October.
Taxpayers may wish to opt out of the advance payments for a variety of reasons, such as if they’d like a larger amount in a single lump-sum next year, or they are concerned that their changing circumstances (a higher income in 2021 or a child aging out, for instance) will result in a potential overpayment from the IRS.
The child tax credits payments are estimates based on the individual’s 2020 or 2019 return — whichever is the last one on file — so it’s possible some may end up owing money next year.
“Because these credits are paid in advance, every dollar you receive will reduce the amount of Child Tax Credit you will claim on your 2021 tax return,” the federal agency explains. “This means that by accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase.”
Those who unenroll will stop receiving payments in advance and can instead claim the entire credit when they submit their tax return next year.
Qualifying taxpayers who choose to unenroll from the monthly payments will instead receive the remaining amount later as a one-time credit.
The IRS released the following schedule of the remaining three unenrollment deadlines and payment dates:
October: Unenrollment deadline is Oct. 4 at 8:59 p.m. PT, payment date on Oct. 15
November: Unenrollment deadline is Nov. 1 at 8:59 p.m. PT, payment date on Nov. 15
December: Unenrollment deadline is Nov. 29 at 8:59 p.m. PT, payment date on Dec. 15
The agency reminds married couples filing jointly that each spouse must unenroll by the deadline, otherwise the household will continue to receive half the credit up front.
Advance payments began in July to tens of millions of eligible households and will continue through the end of the year, for a total of six disbursements in 2021. The last half can be claimed on the 2021 tax return.
Funds for the third round in September were issued to an estimated 35 million households, although the IRS acknowledged a delay in some payments.
The expanded child tax credits are part of $1.9 trillion COVID-19 relief package that was approved by Congress and signed into law by President Biden back in March.
Families who are eligible can receive as much as $300 a month ($3,600 annually) for each child under the age of 6, and $250 a month ($3,000 annually) per child between 6 and 17 years old.
Taxpayers qualify for the full amount if they have a modified adjusted gross incomes of $75,000 or less for singles, $112,500 or less for heads of households, or $150,000 or less for married couples filing jointly.
It’s also still not too late to sign up to receive the child tax credit payments. Those who didn’t file a tax 2019 and 2020, or register with the IRS for the federal stimulus checks in 2020 can do on the IRS’s website here.
More information about the expanded child tax credits can be found at IRS.gov/childtaxcredit2021.