Child Tax Credit Advance Payments

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  • This topic has 17 replies, 7 voices, and was last updated 3 years ago by Meno.
Viewing 18 posts - 1 through 18 (of 18 total)
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  • October 31, 2021 7:28 pm at 7:28 pm #2022890
    Meno
    Participant

    This whole thing doesn’t make sense.

    Let’s say someone is getting a $500 payment every month, that translates into one of two scenarios:

    1) You end up owing a few thousand dollars more than you expected in taxes when you file in 2022 (and possibly owe a penalty for not enough withholding/estimated tax payments)

    Or

    2) You’re smart and you think ahead, adjust your withholding/estimated tax payments, and end up paying back the money almost as fast as you’re receiving it.

    Either way it doesn’t seem beneficial at all. Maybe I’m missing something.

    October 31, 2021 7:58 pm at 7:58 pm #2022913
    ujm
    Participant

    You’re probably missing something.

    October 31, 2021 9:50 pm at 9:50 pm #2022921
    ☕️coffee addict
    Participant

    Just like the stimulus wasn’t taxable this isn’t either

    The child tax credit is a tax credit (just look at the name) not taxable income

    October 31, 2021 9:50 pm at 9:50 pm #2022922
    ☕️coffee addict
    Participant

    Also it’s not for 2022 it’s for 2021’s taxes

    October 31, 2021 9:51 pm at 9:51 pm #2022939
    Shimon Nodel
    Participant

    Do you know what is a tax CREDIT?

    October 31, 2021 11:26 pm at 11:26 pm #2022980
    Meno
    Participant

    Ujm, what am missing?

    Coffee addict, you’ll owe more taxes not because the credit is taxable, but because your tax credit will be smaller since you already received part of it in cash (e.g. if you received $3000 in advance payments, your tax bill will be $3000 more than expected, because your credit will be $3000 less than expected). Also, you file your 2021 tax return in 2022 – not sure what your point was with that.

    Shimon Nodel, was that question directed towards me? Because I think I understand it quite well. If I’m missing something please explain it to me. Thanks

    October 31, 2021 11:37 pm at 11:37 pm #2022984
    Always_Ask_Questions
    Participant

    I think it is the same as getting it at tax time, but baal bais lavan wants you to feel how he cares about you monthly and also budget accordingly, and in truth many beneficiaries would like to have it early and also monthly as a free help with budgeting
    An annual windfall might be spent on a one time item instead. He also wants you to know that, contrary to the mishna, you can have Torah without derech eretz and the “credit” is also given to those who don’t owe taxes… A change from previous administration

    October 31, 2021 11:40 pm at 11:40 pm #2022986
    Meno
    Participant

    Ah ok. So it’s beneficial for the people who don’t owe taxes. I hear.

    But for the other people it doesn’t really help to get it early, because you just have to pay it back early as either withholding or estimated payments.

    It’s all just for show.

    November 1, 2021 1:24 am at 1:24 am #2023001
    ☕️coffee addict
    Participant

    Meno

    It’s not advanced

    The money you’re getting now is for this past year’s return, this January is a new credit

    November 1, 2021 2:18 am at 2:18 am #2023014
    🍫Syag Lchochma
    Participant

    Ca- I’m not sure about that. I think they upped the credit and offered some now instead of all later, meaning it’s coming from the next tax filing (2021). The only involvement last years taxes has is that they are using it to determine how many qualify based off it.

    Meno- yikes. I can’t believe I missed this….

    November 1, 2021 9:37 am at 9:37 am #2023127
    ☕️coffee addict
    Participant

    How The Expanded Child Tax Credit Payments Work

    You’re right, I misunderstood this, so that means no credit this coming up year?

    November 1, 2021 11:45 am at 11:45 am #2023187
    Meno
    Participant

    They’re only paying half of it in advance, so there still will be credits. Also, as Syag pointed out, the amount of the credits increased, so it’s possible that even if you didn’t change your withholding you might not end up owing so much when you file. The credits also start to phase out above certain amount income limits so the situation will be different for each person.

    I think there will still be a lot of people surprised to find that they owe taxes when they file.

    You can go online and decline the advance payments and just take everything as a credit.

    November 1, 2021 12:21 pm at 12:21 pm #2023202
    huju
    Participant

    If the opening poster is not a CPA or tax attorney, she/he is missing credentials.

    November 1, 2021 12:23 pm at 12:23 pm #2023207
    Meno
    Participant

    I’m not a CPA or tax attorney. Just a regular guy who does his own taxes.

    November 1, 2021 4:20 pm at 4:20 pm #2023296
    huju
    Participant

    To Meno: You are free to do your own taxes, but please do not confuse the rest of us.

    November 1, 2021 4:40 pm at 4:40 pm #2023300
    🍫Syag Lchochma
    Participant

    Huju- i was actually thinking maybe he could do mine too.

    November 1, 2021 11:47 pm at 11:47 pm #2023439
    Always_Ask_Questions
    Participant

    I wonder whether tax credits (whether income-limited like Biden’s or less limited like Trump’s part) can be eventually converted into federal vouchers – to make sure money is spent properly. I am usually against federal involvement, but this looks like a good place to do it.

    November 2, 2021 2:56 pm at 2:56 pm #2023718
    Meno
    Participant

    So I just did a bit of research and I discovered another possible issue that I hadn’t thought of:

    The advance payments are being calculated based on last year’s tax returns. If your situation changed between last year and this year (e.g. income significantly higher, children no longer eligible) then the advance payments will be higher than they should be, and when you file you will have to pay back whatever you were overpaid.

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