As of June 9th, more than 169 million payments have been distributed in the third round of stimulus payments from the federal government, representing a total value of around $395 billion. The status of the possible fourth round is still up in the air, but in just a few weeks, the initial advance Child Tax Credit payments will start being sent out to eligible Americans. The payments are going to be incredibly impactful for millions of families, but depending on personal circumstances, receiving the payments in advance might not actually be the best way to go. And today happens to be the last day to opt out of those advance payments.
Last week, the Internal Revenue Service released a new Child Tax Credit tool on its website that allows families to check their eligibility, view the status of their advance payments, and unenroll from getting the payments in advance. If you need to unenroll, Monday, June 28th (that’s today) is your last day to do so, and you have to complete the process before 11:59 p.m. ET.
Wondering why anyone would refuse free money from the government? As Guide Financial Planning founder Ben Wacek explained to CNBC, the IRS is prepaying a child tax credit families would normally receive when filing their taxes. Therefore, if you got a higher-paying job or your spouse went back to work after being unemployed throughout the pandemic, you might now make more money, which could change your tax bracket and lead to you owing more when you file your 2021 taxes. Obviously, if you need the money right now, this isn’t going to matter. But if you can afford to wait, it might be beneficial to do so. You’ll still get all of the money you’re owed, just in a lump sum later on.
“If you don’t usually receive a refund, then the advance payments could actually cause you to owe more when you file your 2021 taxes,” Ben Wacek told CNBC in regards to the Child Tax Credit.
As part of the American Rescue Plan Act enacted in March, the Child Tax Credit was expanded and increased, giving eligible families up to $3,600 for each child under the age of 6, and $3,000 for every child aged 6 to 17. Those who choose to take advantage of the advance Child Tax Credit will begin receiving checks of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 through 17. The dates for the Advance Child Tax Credit payments are July 15, August 13, September 15, October 15, November 15, and December 15, and as long as the IRS has your banking information, you should receive the payments as direct deposits, just like the stimulus checks from the first three rounds of economic impact payments.