As part of the stimulus law, there was a provision added that required IRS to begin distributing the child tax credit on a monthly basis for certain taxpayers. This is nothing more than sending you a monthly check for the child tax credit you received in the past when you file your income tax return.
Many people are confused and think this is another stimulus check (money they never got before). Here are a few things to consider:
1. If you take the child credit check now rather than at year-end, your tax refund will be reduced because you already received the money. Many people who plan on that refund will get a surprise at year-end.
2. Opting out of the refund can be more work than you expected. We had one staff member try to opt-out and they had to give their driver’s license number, facial ID, etc. Then the IRS notified the person their spouse would have to do the same opt-out procedure. Who knew it would be so hard to tell the government to save the postage and wait until year-end. You never had to give them all that info to file your income tax and get a tax refund!
3. What happens if you get the tax credit and are not entitled to it because the child is no longer your dependent at year-end? You’ll end up owing the money back to Uncle Sam after you already spent it.
4. We also don’t know how IRS is going to notify you at year-end how much tax credit you already received so if your records don’t match theirs when you file your tax return, things get held up until you and the IRS agree on the credit already received.
In summary, if you really need the money now – take it. If not, we suggest waiting until you file taxes like you always did.
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