Looks like the Opt Out Portal for advanced CTC payments is up and running

[Just-Lisa-Now-]

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021?fbclid=IwAR24QKqKti...

[PATAX]

@Just-Lisa-Now- thanks for the information Lisa... I would be surprised if more than 10% of people utilize this opt out...

[Just-Lisa-Now-]

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

[rbynaker]

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.

[TaxGuyBill]

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@rbynaker wrote:

If they already get the extra $2K via reduced withholding AND now a $1K advance, they're going to have a balance due. 

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Hypothetically, payroll should have increased withholding because they are supposed to compensate for the Advance credit.  But I haven't seen anything from the IRS about that yet.

[rbynaker]

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@TaxGuyBill wrote:

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@rbynaker wrote:

If they already get the extra $2K via reduced withholding AND now a $1K advance, they're going to have a balance due. 

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Hypothetically, payroll should have increased withholding because they are supposed to compensate for the Advance credit.  But I haven't seen anything from the IRS about that yet.

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Sure, but it took the IRS what, two and a half years? to adjust the W-4 for the TCJA changes.  I don't see them getting anywhere with changes to the W-4 in time for them to be useful.  Even if they just change the instructions to "worksheet" the new box 3 amount it takes time to get all of that approved.  There's no way an employer has enough data to determine how much advance CTC an employee will get or even how much their CTC is going to be with the various phase-outs.  If I'm an employer I'm certainly not going to make guesses as to what an employee's revised box 3 number should be.  So at best I think an employee is going to have to use a worksheet hack to make changes to the box 3 amount on the existing W-4 form and resubmit.  Most employers I've seen have at least a pay period lag (and I think the IRC allows up to 30 days to change the withholding after the W-4 is submitted).  So maybe this gets changed in time for the December withholding to be adjusted?  Sure I'm more than a bit cynical here but the IRS doesn't exactly have a great track record.

[BobKamman]

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.  

[garman22]

I just had a client reach out who got the advance and based on income level, should not have. His 2019 was too high as well. 

I've heard of others who have gotten it as well when they did not qualify. This is going to be a CLUSTER "you know what"!!!

[Just-Lisa-Now-]

What if I earn above the threshold?

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.

Still over the limit for the regular 2000 CTC?

[garman22]

Ok, that makes sense, Lisa. I thought my client was too high for the advance. But based on your info, they would get the lower end amount. 

[BobKamman]

@Just-Lisa-Now- "Still over the limit for the regular 2000 CTC?"

Yes

[Just-Lisa-Now-]

I dunno what to tell ya then, that's all I got 🙂