“The advance of the credit reduces the total amount of taxes paid,” said Rob Seltzer, an accountant in Los Angeles. “So there could be a problem with an estimated tax penalty,” depending on how much the taxpayer earns this year compared with last. It may make sense to run a tax projection with a professional to see if it makes sense to opt out.
If you’ve left the country
You need to live in the United States for more than half of 2021 to be eligible for the advanced payments, but expatriate taxpayers can still claim the expanded credit on their return, according to the I.R.S. (The refundable portion of the credit, however, will be curtailed to the prior $1,400 limit.) Military members stationed abroad are still eligible for the advanced payments.
If you rely on a big refund
Some households are simply accustomed to getting a large refund when they file, using it as a forced savings plan. If you have come to depend on a big refund, you can opt out of all future payments and receive the full value of the credit when you file your return next year.
“Opting out or making changes to the payment comes down to personal preference of when and how you want to receive the money,” said Andy Phillips, the director of the Tax Institute at H&R Block. “If you prefer monthly payments of smaller amounts, no need to make changes.”
If you’re still unsure what to do
Sheila Taylor-Clark, a certified public accountant and secretary of the National Society of Black C.P.A.s, has practical advice for clients who don’t necessarily want to opt out but who may be uncertain on where they stand: “Drop that money into an interest-bearing account, so if you owe money you can just send that back next April,” she said.
How to make changes and opt out
To opt out of receiving the payments, taxpayers should visit the Child Tax Credit Update Portal. If you don’t already have an account, you’ll need to create one. And if you’re married and file a joint return, both spouses will need to create accounts and opt out; spouses who don’t opt out will continue to receive half of the advance monthly payment.
Besides stopping the checks, the portal can be used to check the status of your payments; change the bank account receiving them; or to switch your payments to direct deposit from paper checks.
Source: | This article originally belongs to Nytimes.com
