Advance Child Tax Credits

More information coming!

 

Last updated July 15, 2021


As you have probably heard, the American Rescue Plan increased the child tax credits, allowing for a fully refundable credit of $3,000 (ages 6-17) or $3,600 (ages 0-5) for most Americans, with no minimum income. However, the law is based on the same qualifications as the “Earned Income Credit” and is limited to people who have a home in the US for more than half of 2021.

 

The following information focuses on the refundable part of the child tax credits. That's the money you may get each year from the IRS, not credits that go to cover any tax due.

Q: I live outside the United States. Will I receive these payments?

A: If you used a foreign mailing address on the last US tax return the IRS processed, you will probably not receive monthly "Advance Payments." (To date, I have not seen anyone using a foreign address get a payment.) If you use a US address on your taxes, you will probably get these payments, even if the IRS should know you live abroad. The IRS has a system where you can log in to check your status, but it is virtually impossible for people living abroad to use.

Q: Will I get to keep all the money the Treasury is sending me?

A: If you live abroad, probably not

Q: If I don't opt-out and I get the payments, will I still get my regular Child Tax Credit refund next year, like I usually get?

A: NO. The payments the Treasury is sending in July - December 2021 are an advance of your 2021 Tax Refund (that's the report you would file in 2022.) These payments are instead of your refund next year. If they are more than your refund would have been, you will have to pay some back.

For example, if you have one child under age 5, the IRS may be sending you $300 per month in July-December. This is, practically speaking, a subsidized loan of $1,800 that the IRS expected you would have gotten next year. However, these numbers are based on people living in the US with low to moderate income. If you live outside the US for at least half of 2021, you will not be eligible for these enhanced refunds. The maximum refundable Child Tax Credit would be $1,400 if you live abroad with one child. Therefore, instead of getting the $1,400 you usually get when filing taxes, you may have to pay back $400 or more.

Q: If I don't want the advanced payment, can I stop them?

A: Yes! It is too late to stop the first payment (July 15). You have until August 2 to unenroll from the second and future payments. You can unenroll at any time. It takes about 14-16 days for the unenrollment to take effect. However, the online system to "unenroll" or "Manage Advanced Payments" is virtually impossible for most people living abroad to use. Feel free to try it: IRS Child Tax Credit Update Portal

 

I believe your best option to unenroll (opt-out or stop the advanced payments) is to call the
IRS Advance CTC Contact Number: 800-908-4184

If you file jointly, both spouses must unenroll to stop the payments completely.

Q: How do I know if I should unenroll (opt out)?

A: This is a very personal decision. Some considerations:

  • Did you report any dependents under age 18 on your 2019 or 2020 tax return? If not, this isn't necessary, as the IRS shouldn't be sending you any advances.

  • Can you, or do you want to call the IRS to opt out? If calling the IRS stresses you out more than paying some money back, then don't opt out.

  • Would you rather have money in your pocket today? The advanced payments were designed to help people struggling NOW. If that's you, take the money; use it in good health; just don't spend it all. (See calculator below.)

  • Do you have a US account where you get direct deposits from the IRS? If you will be getting paper checks, especially to a foreign address, I would recommend opting out ASAP.

  • Will you be able to pay back any refunds you weren't entitled to by April 15, 2022? If you don't have a US bank account from which to easily make a payment, or the thought of owing money stressed you out, opt out.

  • Will you be sad or confused if you don't get the child tax credit you have come to expect when you finish filing your taxes? Then, please, opt out.

Q: How do I know which refund I received?

A: The Advance child tax credits discussed here will show up as "IRS TREAS 310 CO ENTRY DESCR: CHILDCTC" in your bank account. Regular annual refunds are "IRS TREAS 310 DES: TAX REF." Stimulus payments will say "EIP1" (2020), "EIP2" (January-February 2021), or "EIP3" (March 2021 or later.) If you're wondering where your 2020 tax refund is, CLICK HERE to check your refund status.

Q: What if I get a payment from the IRS that I don't want?

A: You have a few options send payments back to the IRS. 

  • You may write VOID on any check received and mail it back to the IRS.

  • You may write a new check payable to "U.S. Treasury" for any amounts received. Include your SSN and "2021CTC" in the note.

  • If you will be filing a 2021 tax return, you can pay it with your 2021 taxes, as an estimated payment online, or as an extension payment between January and April 15, 2022.

Q: If I unenroll, will I lose out on money that I was entitled to?

A: Based on our current understanding, you will be eligible for the same total amount whether you take refunds as "advance payments" or as refundable credits on your 2021 tax return.

Q: How much should I expect to receive and how much should I expect to pay back if I'm living outside the US, or otherwise not eligible for the maximum new amounts?

A: Use the calculator below (desktop works best) or DOWNLOAD this Excel sheet to run it on your own device.

The more information you add in the second section, the more personalized the calculations will be.