SIOUX FALLS, S.D. (KELO) — Starting Thursday, July 15, the IRS will begin issuing advanced payments of the child tax credit to families who make $150,000 or less each year or single parents who earn $75,000 or less each year.
For weeks the phones have been ringing at Azzara Tax in Sioux Falls with questions about these child tax credit pre-payments.
“A lot of people wondering what they should be doing, whether or not it makes sense for them, a lot of people don’t really understand what exactly it is, some think its another stimulus payment, which it really isn’t,” Azzara Tax Service Assistant Manager Mary Theobald said. “It’s the same child tax credit, you’re just receiving it in advance, but it is a little bit more money than normal.”
The standard child tax credit is usually $2,000; this year it’s up to $3,600 for children 5 and under and $3,000 for children age 6 to 17. But even though parents are getting more money, the prepayments mean they’ll have fewer deductions when it comes time to file taxes.
“Expect a little bit bigger tax bill,” Azzara Tax Founder Charlie Azzara said. “I think it’s gonna catch a lot of people with their pants down, that all of a sudden they’re going to owe more money than they thought.”
Every parent who met the income guidelines on their 2020 tax return will automatically receive a payment starting Thursday unless they choose to opt-out.
“Opting out, you still get the same amount at tax time, you’re just choosing not to get it in advance,” Theobald said.
To opt-out, both parents need to go to the IRS website, create an account and opt-out through the portal. Theobald says the process can take 10-20 minutes per person and in most cases, it’s not something an accountant can do for you.
“Nobody’s going to go to that thing and opt-out because they don’t know how to, they don’t want to and they’re gonna get that money,” Azzara said.
Parents can choose to opt-out of the pre-payments at any time, even if they’ve already received a payment. Azzara said it’s important to keep track of the child tax credit you’ve already received, especially divorced couples who alternate years claiming kids on taxes.
“That’s gonna be one of the biggest questions that we really don’t know the answer to,” Azzara said.
These are all questions that Azzara says won’t be sorted out till tax time.
While the pre-payments are designed to help ease parents’ financial burdens throughout the year, for those who can financially, Azzara suggests opting out and waiting till tax time to get your check to help cut down on any tax filing issues in the spring.