Updated August 16, 2021:
As of recently, the IRS has changed its rules on opting out. Previously, only one spouse needed to access the CTC portal to opt-out of receiving the monthly payment. Now, both spouses are required to access the portal and opt-out. If both spouses do not opt out, you may receive a check in the mail for a portion of the total monthly payment.
We ask that you keep track of any payments you receive, as this information will need to be reported on your tax return. Please contact our office if you have any questions at all.
Taxpayers with children ages 0-5 will receive $300 a month, and taxpayers with children ages 6-17 will receive $250 a month per child through the end of the year. You have the right to opt-out of any remaining payments by registering with the IRS portal.
There are various reasons you may consider opting out, including:
- You will not be claiming the child on the 2021 return. This is often the case with divorced parents. If you take the advance payments and do not claim the child, then you will have to pay back the advance.
You want to reserve the credit to help pay taxes.
Your income has gone up for the year, and you will be in the phaseout range reducing the credit.
Your income is above the phaseout range, and you are ineligible.
The phaseout range is
$150,000 – $400,000 for married filing jointly
$112,500 – $200,000 for head of household
$75,000- $200,000 for single and married filing separately
Taxpayers who do not wish to receive advance payments of the child tax credit (CTC) may now unenroll through the IRS’s new Child Tax Credit Update Portal (CTC UP).
Background on CTC advance payments
The American Rescue Plan Act (ARPA) temporarily expands the CTC for 2021. Under ARPA:
- The CTC is increased from $2,000 per qualifying child to $3,600 for qualifying children ages 0 to 5 and $3,000 for qualifying children ages 6 to 17, including age 17.
- The credit is fully refundable for taxpayers who reside in the U.S. (50 states or District of Columbia) or Puerto Rico, regardless of the taxpayer’s income level.
- For higher-income taxpayers, the credit phases out in two stages.
ARPA also calls for the IRS to advance one-half of the CTC in monthly payments starting in July.
Accordingly, the IRS will issue monthly advances starting July 15 through the end of 2021. Generally, advances will be $300 per month for each qualifying child under 6 and $250 per month for others. Advances will be based on information on the taxpayer’s 2020 tax return or, if not available, on the taxpayer’s 2019 tax return. Payments will be direct deposited or paid by check, depending on the information the IRS has on file.
Example: Mary claimed two qualifying children on her 2020 tax return, Jeff (age 4) and Mike (age 9). She is a head of household filer with AGI of $60,000, which is under the beginning phaseout level for her filing status. She will receive monthly advance payments totaling $550 for the two children:
$300 ($3,600 × 50% ÷ 6 months) for Jeff
$250 ($3,000 × 50% ÷ 6 months) for Mike
$550 total monthly payment
In all, Mary will receive $3,300 ($550 × 6) for the children. The payments will be direct deposited if the IRS has her account information; otherwise, she’ll receive a paper check. In January of 2022, Mary will receive Letter 6419 stating the total of advance CTC payments she received during 2021. When she files her 2021 tax return during the 2022 filing season, Mary will claim the remaining $3,300 CTC.
Using the portal to opt out of CTC advances
Taxpayers may opt-out of CTC advances by using the new CTC UP portal. For instance, taxpayers may wish to unenroll if they expect significantly higher income or expect to claim fewer children in 2021. Continuing with the example, suppose Mary completes and signs Form 8332 allowing her ex-husband Clark to claim Jeff and Mike starting in 2021. She can use the CTC UP portal to unenroll from the advance payments.
At this time, the CTC UP portal is available only to unenroll from advances. Joint filers must both unenroll to opt out of the full advance. Otherwise, the IRS will issue one-half of the advance for the spouse that did not unenroll. The deadline to unenroll from the July payment is June 28. For the full unenrollment deadline schedule, see Topic J: Unenrolling from Advance Payments in IRS’s 2021 Child Tax Credit and Advance Child Tax Credit FAQs.
Later this summer, features will be added to allow taxpayers to:
- Update their mailing address
- Update their bank information
- Add or subtract the number of qualifying children
- Report a change in marital status
- Report a change in income
Once these features are in place, taxpayers will be able to modify their payments without opting out completely. Also, in September, taxpayers who unenrolled will be able to re-enroll. We’ll keep you posted when these updates are available. For information on the CTC calculation and the phaseout for higher income taxpayers, see Topic C: Calculation of the 2021 Child Tax Credit. For tentative timelines on the additional functions, see FAQ A16 in Topic A: General Information.
“IRS Unveils Child Tax Credit Update Portal to Opt out of CTC Advances.” The Tax Institute, 23 June 2021, mailchi.mp/thetaxinstitute/tax-in-the-news-june-23-2021-ctc-up-supplement?e=eb3746f267.