Example: Married family with two children under the age of 17.
Your dependents have a reimbursement of $2000 each. Those $4000 dollars will be advanced in monthly payments starting in July.
How it may affect your 2021 tax refund. If you have $50,000 of income, but your withholding is $200. The first $24,400 is tax-free, but the rest of it is taxable, you will have to pay taxes at the end of the year. For many families, it is normal to have to pay a little, but that amount is covered by the child tax credit. If you fall under that circumstance, you will have to remember that this refund will be advanced to you and you will possibly have to pay your taxes next year.
IRS will send monthly payments for CTC
Why would my family choose not to receive them?
There are three main reasons for opting out of monthly payments:
1. You would rather have a one-time payment next year rather than seven small payments spanning 2021 and 2022. This could be the case for families saving for a large expense or for those who have budgeted that money to pay off outstanding debt.
If you normally have a very low withholding and your federal taxes are covered by your child tax credits, then you may have to pay next year.
2. You know that your household circumstances or your tax situation will change and you don’t want to have to update your information on the portal.
3. You are concerned that the IRS may send you an overpayment based on changes in your situation this year, and you don’t want to worry about paying that money back next year.
Enter the following link to see if you are eligible to receive monthly advance payments.
“Child Tax Credit Update Portal | Internal Revenue Service” https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
Here is a step by step guide on how to unenroll from the Advance Payments of the Child Tax Credit
http://luperuiz.com/blog/child-tax-credit-payments-unenrollment-process/