Its really going to be on a client by client basis if they should opt out or not. The few clients Ive spoken to about it, they get fairly large refunds due to ACTC and EIC, they can get the advances and wont feel it too much in their refund (these are single parents and could really use the advance!)...its the ones that generally owe money or get relatively small refunds, that could sting a bit at tax time.
Its really only $500 less per kid on the return itself.....theyre used to 2000 per kid, now its 3000/3600 per kid with 1500/1800 advanced....so the return will only be short $500 per kid in tax credits
It's very situational. I've been sorting through clients and I have a chunk of clients that are in or beyond the phase-out (so their CTC for 2021 will likely still be $2K/child which we're already adjusting for via W-4 box 3). If they already get the extra $2K via reduced withholding AND now a $1K advance, they're going to have a balance due. Mostly I'm trying to avoid the "why didn't you tell me this was going to happen" situations.
A client who knows he won't be eligible for child tax credit in 2021, because of income limit, tried opting out when the first payment hit his bank account this morning. He's not eligible based on 2020 income either but that return, filed months ago, has not yet been processed. So they used 2019. He reports that after trying half an hour to get through the IRS log-in process, he gave up and will just accept the interest-free government loan. Not as good as PPP -- it has to be paid back.
The Child Tax Credit is still available for people who earn over $95,000 and joint filers earning $170,000 — but they will receive the regular CTC of $2,000 per child. That means they'll receive monthly payments of about $167 through December, representing half of the $2,000 regular CTC.
That $2,000 tax credit is available to single taxpayers earning less than $200,000 and married couples earning less than $400,000, although the tax credit starts to phase out for taxpayers who earn over those limits, according to the Tax Policy Center.
