The first payments of the federal Child Tax Credit program hit bank accounts Thursday, but some parents have contacted the Internal Revenue Service to opt out of future monthly payments.
New Yorkers who filed their 2019 or 2020 taxes with the IRS will automatically earn the child tax credit payments based on their filings, which will be sent monthly through December.
Low- and middle-income families will receive between $30 and $250 for each child ages 6 to 17 and up to $300 per month for children under the age of 6, but some have decided to opt out of the benefit because receiving one lump sum with next year’s tax refund could be more beneficial to their household.
“It varies based on every individual’s tax circumstances,” IRS Congressional Liaison Susie Gainous said during a virtual question-and-answer session about the expanded credit program. “Some individuals will receive the full amount of the advance payments and the full amount of the other half of the credit when they file, and they will receive a larger refund.
“It depends on their income, their number of dependents, their deductions, and things like that,” she added. “Some folks may receive the advance payments and still get the other half of their credit on their tax return, but have a tax liability, so it just depends. It is different for every individual circumstance.”
The child tax credit was increased this spring from $2,000 per child to $3,600 per child under age 6 and $3,000 per child under age 18.
Parents, for example, with two children under age 6 are eligible for a yearly credit up to $7,200. Parents of a child who live in separate households will receive the credit based on how they file the child as a dependent on their income taxes.
The child tax credit payments received is an advance count toward your taxable income, but some people would rather have less taxable income and instead, take the credit to reduce their tax burden, according to representatives with U.S. Sen. Kirsten Gillibrand, D-N.Y.
A family could also receive too much of the benefit this year based on current filings, and be required to pay some of the credit back next spring if their income significantly increased from 2020 to 2021.
“For example, if you are a single mom that made $100,000 last year but now makes $120,000, you should no longer receive the higher payments,” according to a statement from Gillibrand’s office. “However, the IRS will not know about the change in income before the 2022 tax cycle. It is currently unclear if a person would be obligated to pay back the difference.”
The IRS offers repayment protection up to at least $2,000, and will excuse some families from repaying excess credit.
“If you do not qualify for repayment protection, you will need to report the entire excess amount on your 2021 tax return as additional income tax,” according to irs.gov. “This additional income tax will reduce the amount of your tax refund or increase your total tax due for 2021.”
To make changes to your child tax credit payments, visit irs.gov/credits-deductions/child-tax-credit-update-portal.
Families who did not file a tax return for 2019 or 2020 and who did not use the IRS non-filers tool last year to sign up for the Economic Impact Payments who want the monthly child tax credit should visit irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool.
People who did not earn enough annual income to file taxes, or welcomed a new baby or child in 2021, need to update their information with the IRS online at childtaxcredit.gov.
The national Child Tax Credit program was expanded this spring under the $1.9 trillion COVID-19 stimulus American Rescue Plan. President Joe Biden, a Democrat, signed the bill into law March 11.
The expanded child tax credit is expected to benefit about 39 million households, including more than 3.5 million children under the age of 18 in New York, according to the Center on Budget and Policy Priorities.
The credit is available to families in Puerto Rico and all U.S. territories.
Contact your local congressional representative’s office or the IRS for answers to questions about the expanded Child Tax Credit program.