IRS’ New Advance Child Tax Credit Payment & How to Opt Out of Automatic Enrollment

Updated: Jul 1, 2021

You may have received a letter from the IRS explaining that taxpayers don't have to do anything to begin receiving the Advance Child Tax Credit (ACTC) payments for 2021. The letter also states that taxpayers may choose to "opt out" of receiving the advance payments. Your tax team at Restivo Monacelli has provided more information below about the changes to the Child Tax Credit and how this could affect you. In addition, we provided a direct link below should you choose to opt out of receiving advance payments.

What Is the “Advance Child Tax Credit Payment?”

The IRS has made changes to the Child Tax Credit (CTC) to help eligible families get advance payments of the credit starting this summer. The CTC, which were set up and expanded under the American Rescue Plan passed earlier this year, amount to $3,000 annually per child ages 6 to 17 and $3,600 annually for children under 6.

If you are eligible to receive the CTC for 2021 (see eligibility requirements below), the IRS will automatically pay half the total credit amount in advance monthly payments of up to $250 per school-age child and up to $300 per child under 6 from July through December 2021. The other half will be paid out when you file your 2021 taxes.

Who Qualifies to Receive the ACTC?

To qualify for ACTC payments, you — and your spouse, if you filed a joint return — must have:

  • Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or

  • Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool; and

  • A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and

  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and

  • Made less than certain income limits. The credit is income-based and starts to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly.

The IRS will use the information you provided earlier to determine if you qualify and automatically enroll you for advance payments.

Should and How Do You Unenroll from ACTC?

If your income increased from the prior year and is above the threshold, it might make sense to unenroll. It's also important to understand that with these advance payments, the IRS is essentially prepaying a tax credit that you usually receive when you file your taxes.

To opt out, families must unenroll using the IRS’ online portal three days before the first Thursday of the next month (see the IRS' monthly deadlines below). Also note that for parents who are married and filing jointly, both spouses must unenroll.

Please click on the link below if you would like to opt out/unenroll from ACTC:

For those that DO qualify and DO want to receive advance payments of the Child Tax Credit, then no action is required.

If you have any questions regarding the ACTC, CTC or any other tax-related matters, please feel free to reach out to a member of Restivo Monacelli’s tax team at 401-273-7600.