Child Tax Credit Payments May Affect Your 2021 Taxes.
While the idea of getting monthly child tax credit payments can be enticing, there are many things that families need to keep in mind when choosing to get these payments, as it will affect their tax refund when filing in 2022.
If you are receiving these monthly payments in 2021, your tax refund in 2022, based on your 2021 taxes, will most likely be smaller. The reason this will happen is because the payments that the IRS is making to families are simply an advance on your Child Tax Credit that you would take when filing your 2021 Tax returns in spring of 2022. Because you are receiving part of the credit you would have received on your 2021 tax return now, your tax refund next year will not include the full amount of the credit.
There may even be a situation where the total amount of Advance Child Tax Payments is greater than the amount of your 2021 Child Tax Credit – and that would mean that you owe the IRS when submitting your taxes in spring 2022.
The IRS has outlined the process of Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return.
Click Here to view the full IRS Explanation.
How to Unenroll in Child Tax Credit Payments
If you would prefer to receive the full amount of the credit on your tax refund instead of as monthly payments, the IRS Child Tax Credit Update Portal enables anyone who has been determined to be eligible to opt out of the advance payment program.
To Unenroll in the Child Tax Credit Payment Program, Click Here.
IRS Toolkit
The IRS provides a comprehensive toolkit for families to review the 2021 Child Tax Credit and Advance Child Tax Credit Payments Program.