When the Child Tax Credit payments started rolling in, parents all over the United States were exhilarated. The feeling of an extra $250 or $300 per child for every month is enough to brighten up the day.
Kimberly Washington, a former IRS agent defined Child tax credit (CTC) payment as a tax benefit enjoyed by taxpayers with a child under the age of 18. “It is a partially repayable credit to help support low to moderate-income families by reducing their tax liability,” she says. The aim is to reduce the number of US children living in poverty.
Children under the age of 18 are eligible to 3,000 USD per child and 3,600 USD for children under the age of 6. This amount is given yearly and is fully refundable.
How Does Child Tax Credit Payment Works?
According to Washington, the 2023 CTC works differently from the 2021 taxes. In 2021, parents are entitled to CTC if they have dependents under 17 years and if the amount of credit is more than the taxes they owe, they are eligible for a refund of the excess credit up to 1,400 USD for each child.
“But in 2023, the CTC is changing. Filers whose adjusted gross income is less than $75,000 per year or couples with $150,000 gross income are entitled to the enhanced child tax credit. That is; $3,000 for kids above 6 but below 17; and $3,600 for kids below 6 years.
Filers with adjusted gross income above that, are entitled to $2,000 while those that earn $200,000 (single fillers) and $400,000 (couples) are not entitled to it.
The credit tax is refundable till if it exceeds the taxes owed,” she says. The new amendment allows an advanced payment option of 250 USD or 300 USD monthly for each eligible child. “For instance, if a taxpayer receives advanced payment for six months, between July to December, they can claim the balance of their yearly credit (6 months) on their tax return”.
Although child tax child payment is aimed at reducing the financial burden of parents with dependents; there are reasons why you should opt-out of it as advised by experts.
Why You Should Opt Out Of Child Tax Payments
“Recently, I talked my best friend and her husband out of the receiving CTC payment when they asked for some advice regarding the issue,” Washington said. Here are some of the reasons she shared for opting out of child tax credit payments.
Your Gross Income Is Increasing
Whether singly filled or jointly filled, if your gross income for the year will increase, you should consider opting out of CTC. This is because you will no longer qualify for the tax credit and any additional amount you receive will be paid back.
Parents qualify for CTC if their gross income is $75,000 ($150,000 for couples) but when it exceeds $200,000 or $400,000 for joint filler, there is a $50 reduction for every $1000. Plus you may not be eligible for the payment.
You Want A reduction In Your Tax Refund
The child tax credit is a credit payment. When you file for it this year, you get an advanced payment of what you are entitled to in 2023. Opting out of it will reduce the amount you owe in the coming year. If you don’t want to owe in the next tax season or you want a larger refund with CTC paid as a huge sum, you may consider opting out of the child tax credit.
Your Status As A Dependent Will Change The Coming Year
If by the coming year, your child will turn 18 and your dependent status will change, it is advisable to opt-out if it this year, to avoid advanced payments. Unless you are willing to repay the amount.
“The IRS may require a repayment of some, if not all of your CTC payments when you stop being a dependent”
Although, there are measures put in place, like the full repayment protection safeguard, to exclude families earning below a certain amount from paying back the credit.
Ways To Opt Out Of Child Tax Credit Payments
For some families, the monthly payments are a huge difference between financial stability and bankruptcy. While for some, it is a preferable choice to stop the payment. If you want to opt out of it, you can do that online using the IRS Child Tax Credit Update Portal.
To sign in to the portal, you need an existing IRS username. Alternatively, you can use an ID.me account.
- For either signing in option, you need to be prepared for the process and the glitch that accompanies it
- Have your ID ready (a driver’s license or a passport) if you are signing in with your ID.me account. The system will make a comparison between your face and that on the photo ID
- For the IRS username, be prepared for KBA (knowledge-based authentication) questions. You may have to answer questions about your credit card and your mortgage. Have that information ready.
- You also need a cellphone to confirm your name from the cell phone’s plan. If your name isn’t on the plan, you may not find it easy to create an account in the portal.
After signing in, confirm your wish to unenroll from the monthly advanced payment and cannot enroll again.
It may take up to 7 days – or more – for your opt-out request to be processed. You should check the portal frequently to be certain.
In case you filed for CTC as a couple, each, of you, should unenroll separately. If one person opts out and the other doesn’t, both of you will still receive the same amount you were supposed to receive as a couple.
There are deadlines for opting out if you want to stop the payment before it arrives. You should request an opt-out three days to the first Thursday of the new month before the monthly payment arrives.
Although the four checks have already gone out, there is still time to unenroll from the last two. To opt out of the credit payment plan starting from November, you should do that on the 1st or 2nd of the month.
Bottom Line
Child Tax Credit is a credit payment benefit for eligible taxpayers with dependents, it aims at reducing the financial strain on families, however, filling out for it is not always the best option especially if you want a bigger tax refund in the coming year.
