Here's What You Need to Remember: There could be several factors pushing families to choose to receive the child tax credit in a lump sum next year, including if they tend to owe money to the IRS after filing taxes. Those families could be depending on the lump sum to help pay for a hefty, expected tax bill in 2021.
The IRS is expected to start issuing the enhanced child tax credit payments on July 15 and continue on a monthly basis through the end of 2021. While some families may want to receive the money in monthly payments now, others may decide to postpone receiving the additional direct relief until they file their 2021 taxes.
Later in the month, the IRS will launch an online tool that allows families to opt-out of the monthly child tax credit payments.
“It’s important to allow that ability to opt-out of these payments because we don’t know how people have budgeted their tax refunds,” Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, told CNBC. “And so if it’s important to them that they receive this credit as one lump sum payment, we want to make sure people still have that option.”
There could be several factors pushing families to choose to receive the child tax credit in a lump sum next year, including if they tend to owe money to the IRS after filing taxes. Those families could be depending on the lump sum to help pay for a hefty, expected tax bill in 2021.
“It’s protection from owing a surprise amount of money to the IRS,” Maag said.
Another reason could be that families may want a lump sum of money next year to help fund a larger purchase, like a car or a down payment on a house.
President Joe Biden’s coronavirus relief package boosted the child tax credit from $2,000 to $3,000 per child under the age of seventeen and gives those with children under the age of six a $3,600 payment.
And those amounts can come in the form of monthly payments between $250 and $300 per child, or families can decide to claim them as a lump sum when they file taxes next year.
So if parents receive those payments for multiple children in 2021, then that money can help pay for a bigger purchase.
“We don’t want to take away that ability from people,” Maag told the network.
The full enhanced child tax credit is available for families with 2020 or 2019 adjusted gross income making up to $75,000 for individuals and $150,000 for married couples who file jointly.
The IRS will begin distributing the monthly payments next month, followed by August 13, September 15, October 15, November 15 and December 15, unless families decide to receive it in one lump sum next year.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill. This article first appeared earlier this year.