Advanced Child Credit Opt-Out

The IRS has announced the procedure for taxpayers to optionally opt-out of receiving the advance child credit payments.  Depending on a client’s circumstances, practitioners should consider warning clients to opt-out of receiving the advance payments.

As discussed in our May 18, 2021 post, the IRS will begin making monthly advance payments of the newly-increased child tax credit on July 15, 2021.  The IRS will compute these advance payments using the income and number of children for whom the child credit was claimed on the income tax return for the prior tax year. 

On the 2021 income tax return, taxpayers will be required to reconcile the advance payments received with the amount of the child credit for which they are actually eligible, using the actual income and number of eligible children for the tax year.  Generally, if a taxpayer receives advance payments of more than the child credit for which the taxpayer is actually entitled for the tax year, the taxpayer must repay the excess amount received. 

Taxpayers who will have higher income in 2021 than in 2020 and/or those who have other changes in circumstances that affect their eligibility for the newly-increased child credit should consider opting out of receiving the advance payment of the child credit.

Such taxpayers can select “unenroll from advance payments” on the IRS portal, which is: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal