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For many, it was a welcome surprise. On July 15, cash flowed into the bank accounts of parents across the U.S. as the government rolled out the first monthly payments of the enhanced child tax credit passed by Congress this spring.

But as helpful as those payments are to a lot of families, they could actually create headaches for others, with some people owing money to the government next year.

As a result, some parents have already opted out of the monthly payments and are instead choosing to receive the entire credit next year when they file their taxes. 

For you and your family

Keep in mind, the Internal Revenue Service is making these payments based on your last tax filing. It's the government's best guess about what your family is due. Half of the tax credit is being paid out now in monthly payments through December. You then claim the rest when you file taxes next year.

But a lot of things can change from year to year. 

So you may be getting more money in those monthly payments than what you are owed, and you will be on the hook to pay some, or even all of it, back to the government when you file your tax returns next year.

One exception to this: If you earn less than $40,000 as a single filer, $50,000 as head of household, or $60,000 for married couples filing jointly, you won't have to repay any of the money, even it there was an overpayment.

Here's how to decide what makes sense for you. 

So who should opt out of the monthly payments?

First off, if you simply prefer to get a big tax credit in the spring as you always have, opting out may be for you. Perhaps you always count on having the child tax credit to offset taxes owed. Or maybe you look forward to receiving a big refund every spring. 

Saby Montoya is in that camp. She opted out of the monthly payments after being surprised by the first one.

"With the large bulk amount, it just takes care of a lot more things," says Montoya, who has a 12-year-old son. 

She uses her tax refund to pay bills, pay for her son's classes, and celebrate his birthday, among other things. 

But there may be other, more pressing reasons to opt out.

LuSundra Everett, owner of Everett Tax Solutions and 

, suggests thinking ahead to what your 2021 tax return will look like. If you're expecting major changes from 2020, you might consider stopping the monthly payments now. For example:

A lot of people took a hit to their income in 2020 due to the pandemic. Maybe you stopped working for a period, or you were forced to take a major salary cut. If your family's income recovered in 2021, putting you above $75,000 for single filers, $112,500 for head of household, or $150,000 for married couples filing jointly, your child tax credit begins phasing out. 

But the IRS doesn't yet know about this increase in income, and so the advance payments going into your bank account every month could be an overpayment.

"If you don't want to be in a position where you have to pay money back, then opting out is the safest thing to do," says Everett.

2) You're divorced and taking turns claiming the credit

Everett uses the example of parents she calls

Mary and Bob, who are divorced and have one child. 

If Bob claimed the child on his 2020 tax return, he would have automatically begun getting the monthly payments on July 15. But Bob is not going to claim the child on his 2021 tax return, because it's Mary turn. 

So Bob ends up owing the government all the money he got through the monthly payments. Mary, meanwhile, has not been getting the monthly payments, so she will get the entire tax credit as one lump sum when she files her taxes.

The 2021 Child Tax Credit covers children from birth to 18. If your child turns 18 anytime in 2021 (even on Dec. 31, 2021), he or she is not eligible for the credit. The IRS should have taken this into account in estimating the amount of your monthly payment, but it's best to double check. 

If you are mistakenly getting monthly payments for that child, you will have to pay the money back.

Likewise, if you have a child who turns 6 this year, you may want to double check that the monthly payment you're getting for that child is correct. The 2021 credit provides up to $300 a month for children under 6, and up to $250 a month for children ages 6 to 17.

OK, I've decided to opt out. How do I do it?

a website for managing your monthly payments

. To stop the payments, you need to create an account with the IRS using a third-party app called ID.me. Heads up: It's not the most user-friendly of apps. You'll need to verify your identity by scanning a government ID as well as your face. Prepare to be patient. 

You can also unenroll over the phone, but that may require even more patience.

An important note: If you're married and filing jointly, both parents need to opt out. If only one parent unenrolls from the monthly payments, you'll still get half the amount deposited into your bank account.

You have an opportunity every month through December to unenroll before the next payment lands. The deadline is three days before the first Thursday of every month. 

Politics and Government News

Andrea Hsu

Author

The first monthly enhanced child tax credit payment has landed, but some families are now opting out. Here's how to decide whether it makes sense for you.

You might consider opting out of the child tax credit. Here's why

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