Prepaid Child Tax Credits To Cause Smaller Tax Returns, Some Will Owe IRS

(KNSI) – Thousands of parents in Central Minnesota started getting monthly payments from an early child tax credit but what will that mean when families file their 2021 taxes?

The Child Tax Credit was raised from $2,000 to $3,600 for children under five and up to $3,000 for kids age six to 17 as long as you have an adjusted gross income of $150,000 or less if you’re married and filing jointly.

Ashley Kerzman is the Business Manager at Landwehr Tax and Accounting in Waite Park, says eligible taxpayers are getting half of the child tax credit now instead of at tax time.

“If you’re used to getting a larger refund at the end of the year, partly because you’re claiming those child tax credits, your refund is going to be less. If you’re roughly breaking out even at the end of the year, and you’re getting these advanced payments, you could potentially have to owe at the end of the year.”

The payments will come for the next six months unless you don’t want to receive the money now.

“If individuals like to have a larger return, and they don’t really need the money, now, maybe they want to opt-out. Or maybe they could use the money or just want the money now. Either way, whether you opt-in or opt-out. It’s really a personal preference and what works best for each individual family.”

She says they’ve been telling people to go to the IRS website, to read the FAQs, to see whether or not they want to get that advance payment.

If you opt-out, you can’t opt back in for the advance payments. The deadline to opt out is August 13.

The advanced Child Tax Credit was approved in the American Rescue Plan signed into law on March 11.

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