Advanced Child Tax Credit

[Bruce Homan]

For 2020 tax returns every taxpayer was required to provide the exact amounts of the first and second stimulus payments.  For 2021 will every taxpayer be required to provide the exact amount of the Advanced Child Tax Credit payments they received?  Will the IRS provide them with a total that they can pass along to their tax preparer?  Spending an extra 10 minutes with each of my 200+ tax clients adds up to 33+ hours during tax season.  

[Accountant-Man]

Yeppir, that it will.

This is NOT the first time Congress has decided to give TPs advance tax credits, requiring them to know or remember that they were paid in advance and must NOT be claimed on the return. EIP #1 and EIP #2 are the most recent, with EIP #3 and Advanced CTC happening again for 2021.

We had this many years ago, too, when they raised the CTC from $600 to $1,000 and paid the extra $400 in advance. Ah, the good old days.

I guess we just have to suck it up, AGAIN, and hope that most of our clients have functioning brains.

[BobKamman]

Wow, all 200 of your clients have kids?  But fortunately, there is nothing in the law that prevents you from setting your fees according to how much work you do.  Is your time worth $150 an hour?  Then $25 for that ten minutes.  Of course, there is nothing to prevent your competitors from doing it for free.

There's a website called irs.gov where you can find answers to most questions.  You have to take some time to research, but it took me five minutes to locate the following.  I figure my time is worth $240 an hour, so that's $20 to pass along to all my clients with kids.  I don't have that many because most of them are retired and not supporting their grandkids.  

In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your advance Child Tax Credit payments with your tax records. You may need to refer to this letter when you file your 2021 tax return during the 2022 tax filing season.

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-t... 

[sjrcpa]

How do you think that will work?

For 2020, I have seen a grand total of two IRS letters 1344 for the EIP. While many of my clients' incomes are too high to receive the payments, more than 2 were eligible.

And yes I bill for my time on this (most of the time anyway)

[BobKamman]

It will probably work better since the letters are going out at the same time as W-2s, 1099s and organizers from those who send them.  If the organizer mentions a $25 additional fee for misplaced IRS letters, you may see more of them than you expect.  

[Christine Rep]

I had heard that there would be a way for preparers to access their client's payment information through an IRS portal so we can reconcile if we are not provided the 6419 letter by the client.  Does anyone know anything about this?  And possibly a link, if available?

Thanks!

[dkh]

I'm hopeful that IRS struggled so much with reconciling RRCs claimed on tax returns with actual payments issued that a portal will be available this year.  But not holding my breath for it.   I was convinced there was was going to be one for the EIPs - nope, never happened.    

[Christine Rep]

I agree and they are still struggling. But getting the CTC amount right on the tax return will be a bigger deal than the EIPs, since the CTC falls under the Preparer's Due Diligence and besides all the headaches not getting the EIP amounts right caused our clients, this could be potentially worse for us too.

[TaxGuyBill]

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@Christine Rep wrote:

But getting the CTC amount right on the tax return will be a bigger deal than the EIPs

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If the client says they received less than the 'full' amount, tell the client they either provide the letter showing the amount or have them get a 2021 Account Transcript that shows that amount.  Tell the client you will not prepare their tax return until you get that.

I am going to include that information in my letter that I mail out in January to my clients (including directions on how to get an Account Transcript).  If they don't provide that information with the rest of their stuff (including if they did not read the letter I mailed), they will be charged an additional fee for me to repeat it to them

[BobKamman]

Confirming eligibility for the CTC is part of the "Due Diligence" rigmarole that IRS wants us to believe is a higher standard than the Undue Diligence that they allow for most other entries on a return.  But subtracting out a wrong amount for the ACTC payments already made, they already admit is just a math error.  So I wouldn't lose any sleep over that issue.  I also keep in place  on an office bookshelf, photos of my kids and grandkids as a reminder that being a parent is often hard work and there are greater priorities than trying to remember whether that first check came in July or August, and whether the higher payment for the newborn started in September or October.  In any case, Thanksgiving week is not a time to start anticipating grouchiness.  Let's wait and see how it all works out.  

[abctax55]

"...all the headaches not getting the EIP amounts right caused our clients, "   (my emphasis)

I disagree.... the clients caused the headaches themselves as they (some? too many?) mostly just couldn't remember how much free money they received.