Child tax credit: Families who have higher 2021 earnings can opt out

The Internal Revenue Service is giving families enrolled to receive monthly child tax credit payments the option to opt out if they are earning more in 2021 than they were in 2019 and 2020. 

The option to stop the payments is being offered by the IRS because some families who no longer meet the eligibility requirements for the tax credit may have to pay it back next April during tax season. 

The child tax credit program was launched as part of President Joe Biden’s $1.9 trillion coronavirus relief package which allowed eligible families to receive up to $3,600 for every child under the age of 6 and $3,000 for every child ages 6 to 17. 

People earning $75,000 or less, married couples making $150,000 or less and a single parent filing as the head of household making up to $112,500 are eligible for the child tax credit program. 

The credit is based on 2019 and 2020 tax returns and was meant to help struggling families during the COVID-19 pandemic. But with states reopening and businesses returning to normality, some Americans who were once struggling are now able to make ends meet, and they may be earning more than they were when the pandemic began. 

Families with an income that has increased since 2019 and 2020 who did not opt out of the first monthly child tax credit payment — which will be issued on July 15 — will have five more chances to decline future payments this year. 

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FILE - The Internal Revenue Service (IRS) building stands on April 15, 2019 in Washington, DC.

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"If you receive a total amount of advance Child Tax Credit payments that exceed the amount of Child Tax Credit that you can properly claim on your 2021 tax year, you may need to repay to the IRS some or all of that excess payment," the IRS said on its website. 

For parents who are married and plan to file jointly, both spouses must opt out of the payments. If families miss the deadline to unenroll, they will receive the monthly payment until the IRS processes their request. 

The IRS has cautioned that if families choose to not get the monthly payments, they are not able to re-enroll in the program until late September. 

To stop the advanced payments, people must use the online portal to drop out three days before the first Thursday of the next month, according to the agency. 

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These are the dates recipients must unenroll by if they do not wish to have to pay back the credit on their future tax return:

  • August 2
  • Sept. 30
  • Oct. 4
  • Nov. 1
  • Dec. 29

The child tax credit program is slated to expire after one year, though Biden has proposed extending it through 2025 with the ultimate goal of making it permanent. 

The Associated Press and Fox Business contributed to this report.