Parents who want to opt out of the first monthly payment of the boosted child tax credit have until the end of day Monday to do so.
The IRS released a new tool last week that lets families verify their eligibility for the credit and unenroll from the monthly payments – worth about $250 to $300 per child – and instead receive a lump-sum payment when they file their tax return in 2022. Coming versions of the tool will allow people to view their payment history, adjust bank account information or mailing addresses and other features.
To stop the advanced payments, families must use drop out using the online portal three days before the first Thursday of the next month, according to the agency. For the first round of payments, which are scheduled to go out on July 15, families must unenroll by June 28.
If families earn too much to qualify for the sweetened tax credits, they can still receive the $2,000 credit for their children if their income level is below $200,000 for individuals and $400,000 for married couples.
However, because the enhanced credit is based on tax returns from 2019 and 2020, families that are earning more money in 2021 should be aware that if they are overpaid by the IRS, they will have to return that money next April during tax season.
For parents who are married and filing jointly, both spouses must opt out of the payments. If families miss the deadline to unenroll, they will receive the monthly payment until the IRS processes their request.
The IRS has cautioned that if parents choose to not get the monthly payments, they are not able to re-enroll in the program at this time.
"Unenrollment is a one-time action," the agency said. "You will be able to re-enroll starting in late September 2021."
Eligible families will receive up to $3,600 for every child under the age of 6 and $3,000 for every child ages 6 to 17, part of the American Rescue Plan that President Biden signed into law in March. Under the relief bill, families can receive up to $1,800 in cash per child through December.
Half of the money will be paid out in cash on a monthly basis beginning July 15. From there, the IRS will deliver the monthly payments on the 15th of each month through December 2021. The remainder of the money will be claimed on families' 2021 tax returns; it will be paid directly to families after covering taxes.
Most families will begin receiving monthly payments automatically next month without any needed action, the IRS said.
The tax credit will go to individuals earning $75,000 or less, married couples making $150,000 or less and a single parent filing as the head of household making up to $112,500. For instance, a family with a 10-year-old and a 4-year-old would be eligible for a credit of $6,600 if they earn less than $150,000. They would receive a credit of $550 per month through December, and then $3,300 when they file their taxes in 2022.
To qualify, the child needs a Social Security number and must have lived with the taxpayer claiming the credit for at least six months during the year.
The tax credit is tapered by $50 for every $1,000 a family makes over the income thresholds.
"If you receive a total amount of advance Child Tax Credit payments that exceeds the amount of Child Tax Credit that you can properly claim on your 2021 tax year, you may need to repay to the IRS some or all of that excess payment," the IRS said on its website.