Child Tax Credit Update: Parents Must Choose Between Monthly Payments, Bigger Refund Check

Monday is the last day for parents to choose to receive enhanced Child Tax Credit direct payments in one lump sum, the IRS said Monday. For those who do not opt out by 11:59 p.m. Eastern time, the payments will come in a monthly check.

The Child Tax Credit is part of President Joe Biden's $1.9 trillion coronavirus relief package passed earlier this year. Families can receive as much as $3,600 for each child under the age of 6, and the advance tax credit payments will be $3,000 annually per child between 6 and 17.

Parents have the option of requesting to receive the payments in one large check. Otherwise, should they not take any action regarding the tax credit payments, they will receive monthly payments on or around the 15th of each month, beginning in July.

People can choose which option they prefer with the IRS even if they did not fully file their taxes. The administration launched the website with full details about the options available.

child tax credit opt out payment amount
Monday is the last day taxpayers can opt out of receiving Child Tax Credit direct payments. Peter Dazeley/Getty Images

Those who miss the cutoff on Monday but would like to opt out of future monthly payments in favor of a bigger check can still do so. The deadlines for the other months—all at 11:59 p.m. Eastern time—are listed below.

  • August 2 for the August 15 payment
  • August 30 for the September 15 payment
  • October 4 for the October 15 payment
  • November 1 for the November 15 payment
  • November 29 for the December 15 payment

The IRS advises that some people may want to unenroll from monthly checks if they expect the amount of tax they will owe will be greater than their expected refund from their 2021 tax return. Since the payments are being paid in advance, the IRS says online that "every dollar you receive will reduce the amount of Child Tax Credit you will claim on your 2021 tax return. This means that by accepting advance Child Tax Credit payments, the amount of your refund may be reduced or the amount of tax you owe may increase."

The agency also notes: "You may avoid owing tax to the IRS if you unenroll and claim the entire credit when you file your 2021 tax return."

Another important factor to consider is if a birthday puts a child over the age cutoff during 2021. Also, the IRS suggests that divorced or unmarried parents may want to opt out of the credit if they alternate years for taking the credit with the child's other parent. In a scenario where someone took the credit on a 2020 return and received the advance payments, which are based on the 2021 return, getting the credit two years in a row could result in the IRS asking for the money back.

Those who opt out of the monthly payment can still get the benefit if they ultimately qualify because their situation didn't change as they had expected. They will then take the credit as part of their 2021 tax return.