Pub. 3 2021 Issue 4

J U L Y / A U G U S T 2 0 2 1 14 nebraska cpas BY SHARON KREIDER, CPA C P A I N S I D E R ADVANCED CHILD TAX CREDIT PAYMENTS: OPT-OUT DATES, PAYMENT SCHEDULE & FAQS The IRS sent the first advance monthly payment of the Child Tax Credit to roughly 35 million U.S. families with 60 million children on July 15. The first batch of payments totaling $15 billion paid as much as $300 per child. If your clients didn’t opt out of the advance monthly payments by August 2, they’re likely to get the August 13 and the September 15 payments. Should your client opt out? We’ll answer this question together, and I’ll provide you with critical dates, opt-out deadlines, and answers to IRS Portal FAQs. Why should your clients opt out? We need to get our talking points straight, becausewemay be hearing from many angry clients once the 2022 tax filing season begins. Clients who expect their usual big tax refund and end up with a smaller amount, or even owe money to the IRS, are going to yell at us, the people who prepared their tax return, not the people who wrote the law. Let your clients know the IRS has been clear that this is an advance payment, not a “gift” from the government. If the monthly advance is too big, it must be paid back when their 2021 tax return is filed. Clients can opt out of the advance. If they opt out, they are not turning down the credit, but putting off when they’ll receive it—in advance payment amounts that the IRS approximated (right or wrong) from prior year information, or in an amount correctly calculated on their 2021 tax return. Three Reasons for Opting Out Here are three cases where unenrolling from the advanced payments may be advisable: 1. The client’s 2021 income wi l l be above the thresholds ($75,000, $112,500, $150,000), and the client doesn’t want to repay the advance. 2. The client’s financial situation is solid. “I don't need the money. I’d rather have a bigger refund next April.” 3. The client’s circumstances or tax situation will change (or has changed) this year, and they don’t want the hassle of updating the IRS portal. Think divorced clients with alternating custody of their child. If it turns out your clients were overpaid or underpaid during the six-month prepayment period, they will have to take the advance payments into account on their tax return at the end of the year. If they're underpaid because they had a baby or their income dropped, they'll get a bigger amount when the tax return is filed. If they were overpaid, they must pay the overpayment back. This is different from what happened with the Economic Impact Payments (EIPs). If the client was overpaid, they could keep the EIP overpayment. If they were underpaid, the client could claim an excess credit when reconciling the EIP on their tax return. The Child Tax Credit Advance is not the same—overpayments must be paid back. How do your clients opt out of the September payment and beyond? Your clients have until 11:00 p.m. CT on August 30 to unenroll and opt out. They can opt out anytime in 2021 to halt the rest of the advance payments even if they've already received payment. NOTE: The IRS has stated that to unenroll, your clients must opt out three days before the first Thursday of the month to halt the next month's payment. See the chart below for more information. Advance Child Tax Credit Payment Unenrollment Dates How-to Instructions: 1. Go to the new “Chi ld Tax Credit Update Por tal” at www.irs.gov/credits-deductions/child-tax-credit-update- portal and click the “Manage Advance Payments” button. 2. On the next page, your client will need to sign in using their IRS or ID.me account. If they have neither, the page will walk them through setting up an ID.me account. They will need an email address, photo ID, Social Security number, and a smartphone or tablet to verify their identity. 3. On the next page, they will see their eligibility and may unenroll from the monthly payments. How much can my clients receive per child? Reiterate to your clients that those who decline this year’s advance Child Tax Credit payments (almost half the total) will still receive the credit amount they’re entitled to. They are only delaying when they receive the benefit of the credit. • Communicate to your clients that if they opt out, they may not get full payment or any payment until after the IRS processes their 2021 tax return in 2022. Source: Internal Revenue Service Payment Month Deadline to Update Information Payment Date July 6/28/2021 7/15/2021 August 8/2/2021 8/13/2021 September 8/30/2021 9/15/2021 October 10/4/2021 10/15/2021 November 11/1/2021 11/15/2021 December 11/29/2021 12/15/2021