How can you change the IRS payments?
The IRS began sending most families advanced payments of the Child Tax Credit. And, great news for families raising children, the Child Tax Credit has been increased for 2021.
But, is the advanced payment the best choice for you and your family? Has your family situation changed since you filed for 2020? What can be done about it?
How do you know if the advanced payments are right for your situation?
Do you usually owe money when you file your taxes? If so, you may be leveraging the CTC to pay your taxes. If you usually receive just a small refund, you may also be in the group of taxpayers who are leveraging the CTC to pay taxes. In both cases, receiving half of the payment ahead of tax filing day may mean that you will not have the credits available to cover your tax. This can lead to owing more money in April. As a result, you may even find yourself paying penalties at the end of the year.
If you usually receive a big refund and depend on that refund to make major purchases, it is possible that your refund will be smaller than usual because you are receiving part of the CTC now in monthly increments instead of as one lump sum as a refund.
What can you do?
It is possible to turn off the payments. First, you must have an account on the IRS website. If you already have an account, turning off the payments is a quick process. If you do not have an individual account set up, it will take a take a few minutes. On the IRS website, www.irs.gov, scroll down and choose the option “Child Tax Credit” and follow the instructions. If you filed a joint tax return, your spouse would also need to have their own account on the IRS website and separately request the payments be turned off.
What if I you are not claiming dependents on your tax return for 2021?
You will definitely want to turn off the payments. Also, expect to be required to pay the money back to the IRS in April if you have already received payments. The IRS bases the payments on the tax return you filed for 2020 and they don’t know that your situation has changed.
Having trouble deciding?
If you are having trouble deciding what to do, call our office. We would be happy to consult with you on the best choice for your family.