Thread by @BillKinneyCPA

So here’s the scoop on the new child tax credit changes. It’s being implemented very quickly. It’s using some of the same infrastructure set up for the economic impact (stimulus payments) but it’s different in many ways. #tax #CTC #TaxTwitter

Here’s the gist of it, tho there’s situations that I won’t cover here. Please consult a tax professional for advice in your own situation. This does not constitute advice in your particular situation.

Over the past couple years, the max child tax credit has been $2,000 per child. This is being raised to $3,000 for 2021 per child age 6 - 17 at the end of 2021, and $3,600 per child under 6 at end of 21.

Good, more credits! But, the legislation also directs the IRS to advance half of the tax credit. This is going to start on July 15th! If you qualify, you will get $250 per child over 6 and $300 under 6, July-Dec direct deposited into whatever account you have on file with the IRS

Half will be advanced, and you will claim the other half on your tax return in early 2022. You can opt out of the advance. You may ask, why would I opt out? More money up front! Well.. a few reasons.

1) You have adjusted your withholding to be lower such that the credit covers you at return time. Max impact - $500 per child less you’d get at tax time. (Difference between 2000 and 1500 credit on return). You may be better opting out versus changing withholding.

2) You don’t actually qualify for the additional tax credit based on your 2021 income. There is a clawback to the IRS and you will have to pay it back. This phase out is $150,000-170k for MFJ, 112,500-132,500 for HOH and $75,000-95000 single/MFS.

If you think you fall into either of these categories next year, you should consider opting out. You get money now but you may get an unexpected bill at tax time. No bueno.

The IRS has created a Child Tax Credit Portal at irs.gov/credits-deduct… - it answers many questions that I probably didn’t cover here. It also has a link to the opt-out portal and tells you if you’re eligible after you log in.

Note: if you file married filing jointly, you BOTH need to sign in and opt out in the portal. If only one of you opts out and you qualify, the IRS will send you HALF the payment.

If you don’t already have an IRS account, I recommend it. They have a new process to create one using ID.me. I went through the process today, it is very technology forward for the IRS and worked great.

You have to opt out by June 28th for the July 15th payment. You can opt out of future payments after that. The short turn time on this is going to give pros some nightmares, hence this thread!