Child tax credits: Monday is unenrollment deadline to choose between monthly payments or lump sum

Payments begin July 15
Posted at 1:05 PM, Jun 28, 2021
and last updated 2021-06-28 18:21:21-04

WEST PALM BEACH, Fla. — Monday is the deadline for parents to unenroll from receiving the first monthly payments of the new child tax credit and instead receive one lump sum.

MORE: 5 things to know about new child tax credit payments

The payments are part of President Joe Biden's American Rescue Plan that was passed in March.

Families can opt out of the monthly payments by visiting the IRS's Child Tax Credit Update Portal.

Parents should be aware that if they decide to opt out for one eligible child, they are opting out for all their children.

Who should unenroll from monthly payments?

The IRS says families thinking about unenrolling from monthly payments should do so if they "expect the amount of tax you owe to be greater than your expected refund when you file your 2021 tax return."

Because these credits are paid in advance, every dollar that families receive will reduce the amount of Child Tax Credit that can be claimed on your 2021 tax return. By accepting advance child tax credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase.

Boost in Child Tax Credits starting July 15, 2021
Families can receive as much as $3,600 per child starting July 15.

To stop advance payments, you must unenroll three days before the first Thursday of next month by 11:59 p.m. Eastern time.

What is the deadline to unenroll?

  • July: Unenrollment deadline is June 28 with a payment date of July 15
  • August: Unenrollment deadline is Aug. 2 with a payment date of Aug. 13
  • September: Unenrollment deadline is Aug. 30 with a payment date of Sept. 15
  • October: Unenrollment deadline is Oct. 4 with a payment date of Oct. 15
  • November: Unenrollment deadline is Nov. 1 with a payment date of Nov. 15
  • December: Unenrollment deadline is Nov. 29 with a payment date of Dec. 15

The expanded tax credit increases the maximum child tax credit in 2021 to $3,600 for children 5 or younger and to $3,000 per child between 6 and 17.

The full credit is available to married taxpayers filing a joint return with an adjusted gross income less than $150,000 or $75,000 for individuals. The enhanced tax credit will phase out for taxpayers who make more money and cease for individuals earning $95,000 or more and married taxpayers filing jointly earning $170,000 or more.

Taxpayers who don't qualify will still be eligible for the regular child tax credit, which is $2,000 per child under 17 at the end of the year.

The IRS advises families who are eligible for the child tax credit to file their tax returns soon, if they haven't yet, to make sure they receive the appropriate amount of the payments.

Chantelle Davis, owner of A Class Tax Solutions, said families that usually owe taxes or expect to make more money this year should consider opting out.

"Whether it's the $3600 or the $3,000, it's fully refundable. So what that means is it can totally offset any tax liability that you may find yourself having when it's time to file the 2021 taxes," Davis said.

The IRS has an online tool to help families who don't file tax returns register for monthly child tax credit payments.

If families do no opt-out of the monthly payments, they should watch their mail around July 15 for their mailed payment.

If you have to update your bank information or mailing address, tax experts suggest you opt out of the first payment and then enroll after the IRS adds those tools to update your information.

The IRS says unenrollment is a one-time action and you will be able to re-enroll starting in late September 2021.

Households covering more than 65 million children will receive the monthly payments through direct deposit, paper check or debit cards.

The Biden administration said the American Rescue Plan is projected to lift more than five million kids out of poverty this year, cutting child poverty by more than half.

The advance child tax credits are only for 2021. However, Biden's proposed American Families Plan would extend the credit to 2025 and make them permanently fully refundable.

Visit the IRS's website for more questions and answers related to the advance child tax credit payments.