A Few Tips For Opting Out Of Advance Payments Of The Child Tax Credit

In order to opt out of the Advance Child Tax Credit (CTC), taxpayers need to do so at least three days before the first Thursday of the following month. For example, to unenroll for the August 13 payment a taxpayer must complete the unenrollment process by August 2. Topic J of the IRS FAQ for the Advanced CTC. Taxpayer the full schedule of unenrollment deadlines.

NOTE: It’s already too late to opt out of the first payment of the Advance Child Tax Credit (CTC)

Consider the following as you begin the process of unenrollment:

  • Unenrollment may take up to seven days to process and the IRS recommends checking back to ensure that you have been successfully unenrolled.
  • For joint filers both spouses must opt-out of the advance payments to fully opt out. Otherwise, the spouse who did not opt out will receive one-half of the calculated payment.
  • Taxpayers are now able to use the Manage Payments Portal to update bank account information for payments beginning in August. July payments will use bank information already on file with the IRS.

There are two ways to authenticate yourself with the IRS:

  • If you already have an IRS secure access account you should use that for the authentication.
  • If not, the opt out portal will require you to authenticate using the IRS’ third-party service,
  • The process to either set up an IRS secure access account or to use for authentication involves multiple steps that while not complex are not simple either.

Here are some tips for getting through the authentication process:

  • There is not currently a number to call to do an opt out via phone.
  • Be prepared and be patient with the glitchy technology regardless of the method you choose.
  • For have your photo ID ready. Either a driver’s license or a U.S. passport. The system will use your phone’s camera or webcam to compare your face to the face on the photo ID.
  • For a secure access account, be ready for knowledge-based authentication (KBA) questions. You may need to answer questions about your mortgage or your credit card accounts so have that information handy.
  • Either type of authentication requires a cell phone. A secure access account requires that the cell phone plan be in your name. If you have a family plan and your name isn’t the one on the plan then you may not be able to create your account.

Many tax professionals are predicting that most taxpayers are going to neglect to opt out of the Advance Child Tax Credit (CTC) for many different reasons. Regardless, you may end up surprised, frustrated, and likely unprepared if you have to repay excess credit amounts.

Here are a few more tips for recipients of the advance payments that may make next year’s filing season go a bit more smoothly for everyone involved:

  • If you are required to file a 2020 tax return and have not yet done so do not use the non-filer portal to receive your advance CTC payments. Doing so may get you your payments, but it may also result in you having to file an amended return for 2020. The non-filer portal files a simplified version of Form 1040 and that will be considered your original return if you have a filing requirement. And remember, even if the IRS opens e-filing for amended 2020 returns, amended returns are still manually processed and manual processing will delay your refund.
  • Keep your end of year reconciliation letter! The IRS will not be issuing a version of Form 1099 (or any other form) to taxpayers. Instead they will be issuing Letter 6419 which will state the amount of advance CTC payments paid in 2021. For 2020 returns many taxpayers didn’t save their EIP letters (Letter 1444) and once EIP 3 started being issued, the look-up tool for EIPs 1 and 2 was taken offline. Manual review of Recovery Rebate Credits for taxpayers who didn’t save or didn’t receive their Series 1444 letters is one of the reasons many 2020 tax returns have not yet been processed and taxpayer refunds are being delayed. Tax practitioners are hoping that, come filing season 2022, a look-up tool for the advance CTC payments will be available to both taxpayers and tax practitioners with the proper authorizations on file to ensure that the payments are correctly reconciled on taxpayers’ 2021 tax returns.
  • Keep revisiting the IRS FAQs. The IRS updates the FAQ information frequently. Unfortunately, the frequent updates mean revisiting the site to check for updates and re-reading questions to ensure that the information you read a week ago hasn’t changed recently. It’s tedious but the information is thorough and reasonably well organized into topics.

Talk to your tax professional as soon as possible to understand your options and if opting out is best for you and your family. Be prepared!