Tens of millions of families received some extra money on Thursday, when the IRS distributed the first of six monthly payments from the newly expanded child tax credit.
Roughly $15 billion has been sent to 35.2 million families, with an average payment of $423, the Treasury Department and IRS said in a joint statement. The money is expected to reach some 60 million children.
"For the first time in our nation’s history, American working families are receiving monthly tax relief payments to help pay for essentials like doctor’s visits, school supplies, and groceries," Treasury Secretary Janet Yellen said in a statement. "This major middle-class tax relief and step in reducing child poverty is a remarkable economic victory for America — and also a moral one."
But some parents may want to reconsider whether they want the monthly payments.
That's because the enhanced credit is based on tax returns from 2019 and 2020, meaning individuals who are earning more money in 2021 should be aware that if they are overpaid by the IRS, they will be on the hook for returning the money next April during tax season.
"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.
To stop the advanced payments, families must drop out using the IRS's new online portal three days before the first Thursday of the next month, according to the agency.
The June 28 deadline to opt out of the first round of payments has already passed, but parents can still drop out of future payments using the IRS's new online portal. Parents have until July 30 to elect to stop receiving the payments before the second goes out on Aug. 15, according to the agency.
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."
Low- and middle-income parents can expect to receive $3,000 for every child ages 6 to 17 and $3,600 for every child under age 6 under the expanded child tax credit.
The payments are income-based and begin to phase out for individuals earning more than $75,000 and married couples earning more than $150,000. The tax credit is tapered by $50 for every $1,000 a family makes over the income thresholds.
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.
There’s no limit on the number of children who can receive the credit per family.