OT: Child Tax Credit “Payment”

[CoopeReese]

I opted out today. I have to pay every year, so I would rather be surprised how much less I have to pay than receive anything right now. Not rich as some big swinging’ D!cks on the board, but blessed to not need it right now.

I’ll say, the online opt out process where I had to do a biometric scan of my face was unnerving. Sucks that my wife has to do it as well.

 

[B. Winstonworth]

Can you reconcile your comments with Q A10 on this page?

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

I believe you when you say you are a CPA (and I’m no expert on this), but the IRS website seems to refute what you are saying. The only adverse consequence is if you have a child whose status would change from last year.

thanks for the help. I am just trying to understand this (and not argue).

Edit: …and I am fully aware that this would decrease one’s refund if they normally get these credits. That’s different from taxable income.

My understanding is that the child tax credit was increased to $3600/$3000 for taxpayers below the $150k threshold (up from $2000) and the advance payment for taxpayers who can take the full amount is just an advance of the increased amount (i.e., an advance of the $1600/$1000 additional credit). So these taxpayers should theoretically still have the same credit come tax time in 2022 as they had filing in 2021 (for tax year 2020).

Taxpayers above the $150k threshold get phased out of the increased amount, such that most who would have had the credit based in last year’s income linits should still have at least the $2k credit. The “problem” for these folks is this $2k is getting advanced now if they don’t opt out, so they won’t have as much of a credit when they file next year as they did this year.

I’m not sure if taxpayers who were eligible based on their income last year who wouldn’t be eligible this year will have the increased credit clawed back (I think I remember the stimulus checks being unclear on this point).

The most obnoxious part of all of this is that each spouse must opt out, and if you don’t already have a login with the IRS, you have to upload ID or some crap.

I haven’t looked into this stuff too much, so I may be off here, but this is my general understanding.

 

[tiger61886]

Here's a real world example.

My brother and sister-in-law live outside of Corpus Christi. He works construction and she is a RN at a hospital. Both full-time. They make about $90K per year.

They have one kid. Money is tight but they make it. Recently, their electricity bill has doubled to $450 per month.

They were going to have to make some tough budget decisions but now they can pay their electricity bill.

Both vote straight R and this tax credit will not change that one bit, but my brother is grateful that the Government is helping.

She’s An RN and he works construction and they both make 90k or 90k collectively?

 

[JAMCRACKER99]

As a moderate Democrat I think this is overkill. I have no problem assisting hard working Americans that have kids who truly need some assistance, but this money is going to a lot of people who frankly don't need it.

I have a 34 year old niece who has 6 kids (3 fathers) who is going to be getting too much assistance in my opinion for her being an irresponsible adult.

 

[DaTater]

I got some though not the whole $600 today. Just threw it into the savings account.

 

[kperry2]

As a CPA, I warn that nothing is ever free. It’s the government prepaying you the child tax credit you otherwise would claim on your 2021 tax return.

Problem(s) with this approach is that every parent was automatically opted in and opting out isn’t the most user friendly and both parents have to do it.

Also, like mentioned before there are income limitations depending on your filing status. For instance, $150k kick starts the phase out adjustment. By $400k you shouldn’t get prepaid anything. Another problem is that it’s based on your most recently filed tax return if 2020 is still outstanding so if you are in the phase out area but only starting in 2021, the tax man is going to have a bigger bill waiting on you come April 2022.

Otherwise you’re just getting what you were going to get in April 2022 sooner, but don’t count on that refund if you were planning on getting a pool or going to see the Grand Canyon.

I don't mean to be an ass here and I know this is honest advice but I just don't get how that would be advantageous unless the government is charging interest for the people over the income limits. Assuming the person wouldn't blow the money (a MASSIVE assumption, but given you're a CPA I would think your clients have some sense) it's at worst a 9 month interest free loan, correct? You could at least put the money in a savings account and get marginal interest and have the liquidity if needed, or am I crazy?

 

[CoffeeIsForClosers]

Is it really taxable income? How/why does a pre paid tax credit suddenly become taxable income. Only those with an expected income over $400k will have to pay it all back.

I don’t like it because it is one step closer to UBI and conditions people to government payments, but there are also those who complain about giving the government a “free loan” all year where here you get your money back sooner.

This

No it is not. Sounds like some of the CPAs used by the board need to consult the rule book before advising clients.

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

 

[BoldStrategyTiger]

This

Now this is what I call a reputable source!

 

[ClemsonPA]

No it is not. Sounds like some of the CPAs used by the board need to consult the rule book before advising clients.

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

I don’t understand how this is so hard. It’s not taxable. For one kid under 6, you get $300 a month for the next 6 months and then the other $1800 when you file. If you opt out, you will still get the money in April (unless you have some extenuating circumstance like a kid aging out) while also giving the government a 6 month loan.

 

[IcelandTiger]

At the risk of this becoming a political thread, can someone in the know explain this Child Tax Credit payment I received today?

I don’t trust, nor do I need, money from the government. There’s always a catch.

Any tax pros on the board know anything about this?

It’s a complete joke for the sheep

 

[harristeeter]

So multiple major banks have released their quarterly earnings this week and they’re flush with money.

CEO’s are saying deposits and savings are double what they historically have been. So exactly why is this going out?

 

[CU_4734]

I don’t understand how this is so hard. It’s not taxable. For one kid under 6, you get $300 a month for the next 6 months and then the other $1800 when you file. If you opt out, you will still get the money in April (unless you have some extenuating circumstance like a kid aging out) while also giving the government a 6 month loan.

It’s obviously too late to opt out and I love to over think shit but riddle me this:

If my child turns 6 in September, how would the gubment treat that? 3 months at $300, 3 months at $250?

 

[tiger61886]

they earn a total of $90k for the year.

She must be getting woefully underpaid as an RN

 

[terrier2tiger]

Can you reconcile your comments with Q A10 on this page?

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

I believe you when you say you are a CPA (and I’m no expert on this), but the IRS website seems to refute what you are saying. The only adverse consequence is if you have a child whose status would change from last year.

thanks for the help. I am just trying to understand this (and not argue).

Edit: …and I am fully aware that this would decrease one’s refund if they normally get these credits. That’s different from taxable income

Can you reconcile your comments with Q A10 on this page?

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

I believe you when you say you are a CPA (and I’m no expert on this), but the IRS website seems to refute what you are saying. The only adverse consequence is if you have a child whose status would change from last year.

thanks for the help. I am just trying to understand this (and not argue).

Edit: …and I am fully aware that this would decrease one’s refund if they normally get these credits. That’s different from taxable income.

No worries and Q A10 reconciles in the sense that it’s not taxable income but it is reducing the credit you would otherwise claim on your tax return. That credit acts like withholding so if they orepay you the credit then you don’t get to claim it on your return like you normally would.

I didn’t cover all the details for times sake, but that Q and A hits on what i was saying in that if you have a 5 year who turns 6 or a 17 year old who turns 18 before 1/1/2022 so by 12/31/2021 then their qualifying credit figure goes down or away depending on the scenario. Im that Q&A it mentions that if your situation changes from 2020 to 2021 that will be reflected durinf the 2022 tax season when you file the 2021 tax return. Thats when it comes due or if you opt out you can claim it. If you are a business owner and from year to year you have large ebbs and flows then this could set you up better or worse come tax time. For instance if you made $150k combined on your MFJ return last year but your flow through business had a great year and you crossed into $500k then you may get the credit up front only to pay it Back with the return.

Tracking the payments will be key though because otherwise you can expect a love letter from the IRS.

 

[clemsonkelly]

Opted out

 

[terrier2tiger]

I don't mean to be an ass here and I know this is honest advice but I just don't get how that would be advantageous unless the government is charging interest for the people over the income limits. Assuming the person wouldn't blow the money (a MASSIVE assumption, but given you're a CPA I would think your clients have some sense) it's at worst a 9 month interest free loan, correct? You could at least put the money in a savings account and get marginal interest and have the liquidity if needed, or am I crazy?

Not crazy at all and that could be a great approach depending on yourself tax situation. The problem is when you are a taxpayer who pays quarterly estimates based on your prior year tax return. The credit you claimed, if any, was built into those estimates. If the IRS were to overpay the credit because of you having a great year financially then you could have interest and penalties with under payment because you got a credit you shouldn’t have and your estimates dodnt make up for it. Still not a huge deal. All of this is stream of consciousness too so I could’ve left a piece out.

Altogether, if you get and use it wisely and don’t waste it then correct either way when it comes time to do your times maybe you have to repay it but you made a little on it first (haha lets tax that too) or maybe you get to keep it. Even though its only half of the credit. Not the full $3k or $3600 being advanced.

maybe worst case is a $500k MFJ couple with 8 kids that spend every penny of it because in 2020 business was bad. Then you could be increasing your tax liability without realizing it. Haha but thats not every family out there.

 

[terrier2tiger]

No it is not. Sounds like some of the CPAs used by the board need to consult the rule book before advising clients.

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

It’s tricky talking taxes because even though it’s not income, it does impact your tax liability favorably or unfavorably. Since a credit is a dollar for dollar deduction and acts similar to your withholding things like this actually create a bigger ending impact then an income item. At least with income its at your effective tax rate when evaluating the impact. With a credit though, if you miss you’re missing $ for $ and not at a percentage anymore.

 

[tigerrecon]

It was hilarious how hard it was to opt out of getting the payments right now.

This country is torn on voter ID's, but to prove identity with the same government, aka the IRS, you have to jump through some serious hoops that would keep 82% of this county from voting!

This irony of this country has reached the point of being able to describe or even try to quantify.

And I blame the voter's and the right and left side, for allowing it to get to this point...

 

[orangedreamweaver]

Is this extra money? I understood its just am advance of normal child credit you get on taxes. Just paid early instead of at tax return time.

This is the correct answer

 

[BuzzAroundTiger]

I did the Google search and read what they put out. Just don’t trust them.

Curious if any tax pros know how this impacts the tax credit at the end of the year.

It's an advance on the credit. So if you take payment you will not get as much back on next year's return. Basically they're giving you that credit in monthly installments

 

[nytigerfan]

At the risk of this becoming a political thread, can someone in the know explain this Child Tax Credit payment I received today?

I don’t trust, nor do I need, money from the government. There’s always a catch.

Any tax pros on the board know anything about this?

cant help you. I am libtard communist who makes a shitload if money as a capitalist. I don’t qualify for poor benefits.

 

[essoclemsontiger]

This is not taxable income. It’s a tax credit. There’s a difference. The normal child tax credit is $2k per kid. For 2021 only, it’s been increased to $3600 per kid. The phase out begins at $50 per thousand of AGI over $150k married filing jointly. They (meaning the gov) took the lump sum of the tax credit you would receive based on the most recently filed taxes they have on record, and decided 50% of said lump sum will be paid out in monthly installments the 15th of each month July-Dec. The remaining amount of the credit you can take on your taxes.

Just like the stimulus checks, there will be a true up on what remaining credit you can take, or $ you receive for 2021 when you actually file your taxes and it’s based on your actual 2021 AGI.

If you normally don’t like the government keeping your $ because you’d rather put it to use, receiving this credit now is no different.

 

[scotchtiger]

For those of you who opted out, how did you even know to do it? I haven’t seen anything about this until this thread.

 

[purenonsense]

Why would you refuse money even if its taxable? It's not like your marginal tax rate is over 100%

because his tax man is letting his political beliefs overcome his tax reasoning

 

[ChicagoTiger85]

There’s been a child tax credit, among other tax credits, for a long time. Kind of odd to “mistrust” this specific credit, although I don’t think this is good policy. The child tax credit should be expanded, but not by turning it into monthly welfare payments.

 

[ChicagoTiger85]

It's an advance on the Child Tax Credit you WOULD claim in April 2022 when you do your taxes for 2021.

You will not be able to claim this credit in April.

Silly Joe Biden....

Gonna be a lot of pissed off parents come tax time this spring, banking on that big "free interest loan" they get repaid by the gubment every year, only to find out it'd been paid to them in installments the prior six months

It also expands the credit.

 

[CUT93]

For those of you who opted out, how did you even know to do it? I haven’t seen anything about this until this thread.

You don't have to opt out if you would not qualify based on your 2000 tax returns(they will not send $ in this case).

 

[DeathValley_13]

It's an advance on the Child Tax Credit you WOULD claim in April 2022 when you do your taxes for 2021.

You will not be able to claim this credit in April.

Silly Joe Biden....

Gonna be a lot of pissed off parents come tax time this spring, banking on that big "free interest loan" they get repaid by the gubment every year, only to find out it'd been paid to them in installments the prior six months

Wait, are you saying it's not "free" money?!!!

This is why we will always have poors

 

[DeathValley_13]

As a moderate Democrat I think this is overkill. I have no problem assisting hard working Americans that have kids who truly need some assistance, but this money is going to a lot of people who frankly don't need it.

I have a 34 year old niece who has 6 kids (3 fathers) who is going to be getting too much assistance in my opinion for her being an irresponsible adult.

I've seen many like this. She'll probably plop out another half dozen. You'll love seeing her Escalade in front of her double wide

 

[PAWrocka]

What a f’n pain in the ass …

thanks Joe you f’n sentient turnip

 

[ClemTigsCo]

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

Not extra money. Just getting now instead of waiting until doing taxes.

This is flat false. This is a new tax credit that couples making under $150K receive.

If you choose, you can wait to receive it in a lump next April, but it will still be new $ (and you’d be stupid).

Amazing how many people on this board are so bought in to shitting on Democrats that they’re just itching to turn down an extra $300 per kid a month.

 

[ClemTigsCo]

As a CPA, I warn that nothing is ever free. It’s the government prepaying you the child tax credit you otherwise would claim on your 2021 tax return.

Problem(s) with this approach is that every parent was automatically opted in and opting out isn’t the most user friendly and both parents have to do it.

Also, like mentioned before there are income limitations depending on your filing status. For instance, $150k kick starts the phase out adjustment. By $400k you shouldn’t get prepaid anything. Another problem is that it’s based on your most recently filed tax return if 2020 is still outstanding so if you are in the phase out area but only starting in 2021, the tax man is going to have a bigger bill waiting on you come April 2022.

Otherwise you’re just getting what you were going to get in April 2022 sooner, but don’t count on that refund if you were planning on getting a pool or going to see the Grand Canyon.

A. This is flat out false.
B. If you ate really a CPA no one should ever hire you.

 

[ClemTigsCo]

Lol. Love the “humble” brags at the over 150k.

Not a humble brag, just the facts.

I passed $150K a long time ago because I’m ****ing good at my job and the free market agrees with that. I ain’t humble about that at all, but I’m happy to brag about it.

So, I won’t benefit from the tax credit. But I still think it’s excellent policy because working families have been getting screwed for years even before COVID and they damn well deserve the help rebuilding right now.

But hey, all you morons on this board who think this is some gimmick, if you want to sign your tax credits over to me, I’ll still be happy to take it.

I make a good living but I’d be just fine having a few K more at the expense of people who are so bought into an ideology that they’re willing to give away money.

 

[ClemTigsCo]

It's an advance on the Child Tax Credit you WOULD claim in April 2022 when you do your taxes for 2021.

You will not be able to claim this credit in April.

Silly Joe Biden....

Gonna be a lot of pissed off parents come tax time this spring, banking on that big "free interest loan" they get repaid by the gubment every year, only to find out it'd been paid to them in installments the prior six months

Yeah, except you’re totally wrong.

First child tax credit payments have been sent. Here's what you need to know | CNN Politics

Tens of millions of families have been sent the first payment of the expanded child tax credit, the Internal Revenue Service and the Treasury Department said Wednesday night. The beefed-up credit will provide them with extra funds each month through the end of 2021 along with a tax break next year.

www.cnn.com

And I do apologize. The $250 to $300 per month per kid for eligible families is only HALF of what they get. They get the other half when they file next year.

So not only are you not robbing Peter to pay paul, but you’re getting even more next April… if you’re not so stupid to turn it down over ideology.

I have fun with the idiot Republicans on here but in all seriousness people, whether you are D, I, or R, if you’re eligible for the credit go get it. It’s been a hard, hard, year for so many Americans, especially those of us with kids. The whole point of this policy was to make it a little easier for regular families with kids to rebound (while cutting child poverty in half to boot).

I’m an utter partisan, so I love to dunk on Republicans for the fact that every single one voted against this. But I’m also an American who wants to see America and Americans do well. So stop listening to Tucker Carlson, go do some research of your own if you don’t believe me, and use the money to make the repairs on the house you’ve been putting off, save for your kids’ college, or to take them on a nice vacation..

 

[ClemTigsCo]

2021 Child Tax Credit and advance Child Tax Credit payments — Topic A: General information | Internal Revenue Service

Frequently asked questions about the Advance Child Tax Credit Payments in 2021 — Topic A: General Information

www.irs.gov

Not extra money. Just getting now instead of waiting until doing taxes.

You clearly didn’t read the link you posted, did you?

Since you’re too lazy, let me explain how this works.

It is a NEW tax credit that no one would have received without the American Rescue Plan.

Since it is a tax credit, it would normally be paid out next April, when people file their taxes.

But since Dems knew people couldn’t wait that long, they set it up so that half of the credit is paid in advance.

So yes, if you prefer to wait until April to receive it all in one lump sum, you have that option.

But either way it’s new money for you.

 

[ClemTigsCo]

It’s an advance , This will have an effect on your taxes next year. Especially if your taxable income got higher. In my friends case he got a new job and it out him just over threshold for 2021 (these payments are based on 2020 returns) so he will owe it all back. It will reduce your tax refund or make you owe more if you already owed. It’s not like the others, this is just an advance. So instead of getting back say $5000 as “normal” you’d get back less. That’s fine for some but It may cause some with small refunds in prior years to owe this year. Or those who owed, to owe more.

Again, this is simply false.

This is an expanded tax credit that is significantly larger than in previous years AND allows families to get their money NOW Instead of waiting till next year.

So you get a bigger tax break AND you get both the new and old money sooner.

So, yes, if you opt out, you can wait and just get it all in April. You’ll get a much bigger refund than you would have gotten before.

But all you’d be doing is giving the government an interest free loan.

 

[ClemTigsCo]

My issue/concern - and I’m still not straight on - is what happens if you don’t qualify (or opt out) but receive the deposit. I think you may have to pay it back on your tax return. Which is moronic if true.

I received my deposit this week and I do not qualify. I immediately opted out.

For those opting out - I believe you and your spouse have to opt out for it to take.

If you don’t qualify you don’t receive the deposit.

If you received a deposit then you qualify.

You can ope out, but you’ll still get you’re money. Just in April instead of now.

Child tax credit payments started hitting bank accounts today. Here's what you need to know.

Most qualifying families will automatically receive the expanded payments, but those who don't have to file taxes or haven't done so will need to update their information with the IRS.

www.nbcnews.com

 

[ClemTigsCo]

Increase of the tax credit you receive every year on your taxes. Instead of receiving it at tax time you get monthly to assist those who need it. At least that’s how it was sold.

This is the second increase to this credit in the past few years, the last being in 2019. I believe this increase is temporary.

Correct. The ARP only increased it for 2021. Though Dems are hoping to extend it in the reconciliation bill are working on now.

 

[ClemTigsCo]

Yay more National Debt.

This Biden tax cut for working families cost about $100 billion.

Trump’s tax cut for corporations and the wealthy cost $1.9 trillion.

If you really care about the national debt, which is the better deal?

 

[Poker_Tiger]

Free money, yeah!

All these Democrats do is give and give.