Hi, my name is Katy Mering and I’m a tax partner at Wegner CPAs. I’ve spent many years working on individual tax returns and so today I would like to introduce you to a new issue with the IRS called the advanced child tax credit.
What is the advance child tax credit?
What this credit is, is in the last tax act that got passed in March they increased the tax credit you get for having children. So if you have a child under five you could be getting a $3600 credit instead of a $2000 credit, and other children that qualify under age 18 it could be a $3000 credit. It all depends upon your income levels, but this credit is out there. The other change is they are going to start refunding that to you starting in July.
So the question is, do you really want to get that money now, or would you like to wait and get that with your tax return which is when you normally get that.
Why would I want to receive the payments now?
So it could be that you want to receive your payments now, and there might be a lot of reasons why you do that. You know your income is down. You know you had left too much money in from your 2020 tax return into 2021. You paid estimated tax payments and your income has gone down a lot.You had new children, maybe you had twins and you’d be getting $7200 and you’d certainly like that now. Stay in the program. That’s fine.
Why would I want to opt out of the payments?
Just understand that if you owe the IRS money, or you don’t qualify for these credits because your income went too high, you will have to pay it back. So there’s a couple of things you have to think about. You may just have to give your Wegner CPAs tax professional a call, or whoever you work with, to find out if it makes sense for you to be getting this refund or not.
A couple of real hot spots are if you are divorced and have joint custody on children and so a child flip flops from year to year from your ex-spouses tax return to your tax return. The IRS is going to look at your 2020 tax return. So if you have claimed two children on your 2020 tax return they’re going to assume you have two children on your 2021 return, and would refund you money based on that. Then when you file your 2021 return if you only have one child you’re going to have to send the money back to the IRS. Probably a situation you don’t want to be in. So that would be a case where you would want to go to the IRS website and turn off the payments.
Another place could be you know you’re going to owe tax because your income is up, or you’re self-employed. There’s lots of places where you just don’t want this money back mid-year because you’re just going to have to pay it back.
When is the deadline to unenroll?
Most likely you’re already past the deadline for July, but you can turn these off going forward. So we would suggest if you want to stop these payments to go in as soon as you can and turn the payment off. You can turn them off in October, November, December, but sooner the better if you don’t want the money.
Where do I go for more information or to unenroll?
So my suggestion is you go to the IRS website and this is where you can choose to turn this off so I’m going to share my screen and show you the IRS website. To get to the IRS website put in www.irs.gov. This should be the home page that you see. You’re going to click on “Get Answers on the Advanced Child Tax Credit”. This should help walk you through everything you need to do. Then click on this button here and hit “Managed Payments,” or if you’re a non-filer submit your information to get these credits. When you click you can and also down here or you can get answers to questions, guidance and resources, and check your eligibility. So these are all here on the IRS website for you. But to turn off the payment you’re going to go to Manage Payments and then it tells you exactly how it works and how everything goes and how you work through it. Now I can’t take you much farther than this because you now either have to have an account with the IRS or you create an account. So you’re going to go in and walk you through exactly how to create an account. And that’s a pretty easy process and then in there you can just turn off the advanced payment. If you have questions above and beyond that or after this presentation please give Wegner CPAs a call and we will be glad to help you out.