July 15th 39 million

[PATAX]

Get ready for a flood of phone calls on approximately July 15th and thereafter when the monthly CTC checks start going out to at least 39 million people... Next tax season looks like another real pleasant time at the beach...

[garman22]

Next season is going to SUCK!! 

I need to send out a bulk email advising all to opt out of this foolishness. 

[PATAX]

@garman22 👍 I was not aware that they can opt out... Also correct me if I'm wrong but if this is an advance payment then they'll get a smaller refund when we complete there tax returns and some of the Nikola Tesla juniors will blame us for the smaller refund... Just my opinion

[BobKamman]

"Checks going out" is like talking about food stamps.  90% of people don't get checks, they get bank deposits.  Food stamps no longer exist.  

[PATAX]

@BobKamman okay correction payments sent to taxpayers Via direct deposit or payments mailed... happy now?

[TiredFarmer]

Supposed to be able to opt out in June on IRS.gov but as frequent as rules change........

[PATAX]

@TiredFarmer thanks for the information...

[TaxGuyBill]

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@garman22 wrote:

I need to send out a bulk email advising all to opt out of this foolishness. 

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I would HIGHLY advise you NOT to do that.  You can warn them of potential consequences, but advising everybody to opt-out could get you into trouble.

If there is a need for a repayment the the Advance credit, low-income people may not need to repay it (or the repayment could be reduced).  So giving all-encompassing advice to everybody to NOT take the Advance credit COULD result in the taxpayer missing out on some money.

[BobKamman]

Well, I don't know.  Writing "phone calls," you're either showing your age or your clients'.  I get emails.  I would get text messages if I didn't have a land line that doesn't accept them.  (I have a smartphone too, but the number is a secret.) 

[Skylane]

I gues my fees will have to go up (again) for increased workload

[PATAX]

@TaxGuyBill thanks for the information

[PATAX]

@BobKamman I get emails, cell phone calls, cell phone text messages, and landline phone calls... Not to mention people asking me questions whenever I bump into them outside of the office...

[PATAX]

@Skylane 👍 most people would probably be okay with that but there are always those who want to eat a steak and pay for a hamburger...

[PATAX]

@BobKamman also I don't care if "phone calls" is an issue with you... Do you have a problem with me?

[Skylane]

@PATAX  if they aggravate me I charge extra..... If they don’t like my fees they can go elsewhere. If they won’t go elsewhere I raise it til they do. 

[IRonMaN · Accepted solution]

Earlier this year, I told a client that I was going to start to prepare returns for only retired clients.  No more dealing with "which kid are we claiming this year" and now we have the added luxury of asking the new question - "how much did you collect in advance payments"?  I had about 2% of my clients that were able to accurately tell me how much they collected in stimulus payments so next year the circus tent is going to be even bigger.  I might have to seriously consider sticking with my "retirees only" plan.

[garman22]

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@TaxGuyBill wrote:

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@garman22 wrote:

I need to send out a bulk email advising all to opt out of this foolishness. 

---

I would HIGHLY advise you NOT to do that.  You can warn them of potential consequences, but advising everybody to opt-out could get you into trouble.

If there is a need for a repayment the the Advance credit, low-income people may not need to repay it (or the repayment could be reduced).  So giving all-encompassing advice to everybody to NOT take the Advance credit COULD result in the taxpayer missing out on some money.

---

Oh crap?! I had not even considered that. My thought process was that there are people who use the CTC to lower their liability and if they accept the advance would end up owing a large chunk at years end. 

Thank you @TaxGuyBill 

[garman22]

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@IRonMaN wrote:

Earlier this year, I told a client that I was going to start to prepare returns for only retired clients.  No more dealing with "which kid are we claiming this year" and now we have the added luxury of asking the new question - "how much did you collect in advance payments"?  I had about 2% of my clients that were able to accurately tell me how much they collected in stimulus payments so next year the circus tent is going to be even bigger.  I might have to seriously consider sticking with my "retirees only" plan.

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hahahaa.....i like that thought. 

[BobKamman]

@IRonMaN   Do you have an issue with people who have kids?  Weren't you one a long time ago?  Maybe before you lost your sense of humor.  😉

[IRonMaN]

The sense of humor is still in tact ——— I still like a good joke ——- why else would I have this job?

[Just-Lisa-Now-]

My daughter is a single mom with 2 kids, she could really use the monthly payments. 

The increased child care credit (she pays close to 15k a year) should reduce her liability enough to make up for the CTC she wont be getting on her tax return.   @TaxGuyBill this will still be non refundable though, right?

[rbynaker]

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@Just-Lisa-Now- wrote:

My daughter is a single mom with 2 kids, she could really use the monthly payments. 

The increased child care credit (she pays close to 15k a year) should reduce her liability enough to make up for the CTC she wont be getting on her tax return.   @TaxGuyBill this will still be non refundable though, right?

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The Child and Dependent Care Credit IS refundable for 2021.  See Sec. 9631 of ARPA21.

Also, for the CTC only half of the increased credit is advanced.  So $1,500 of $3K and/or $1,800 of $3,600.  The remaining $1,500-$1,800 will still be claimed as a credit (subject to phase-out based on MAGI).  So there won't be too much of a "loss" of the credit at tax time because it's substantially offset by the increased credit amount.  If she's used to getting $4,000 for 2 kids, she'll still be getting $3,000-$3,600 (in addition to the advances).  Also the wonky calculation to determine the refundable portion has been eliminated for 2021.

The only cases where I see this being useful are for taxpayers with $0 income tax.  Otherwise they can just adjust their withholding in Step 3 of the "new and improved" W-4 and already get this "advance" via reduced paycheck withholding.  The problem I see is that the higher income folks (who will be phased back to the old $2K numbers) may already be doing this (I know I have several clients who are) and without action on their part, they get both reduced withholding and monthly IRS payments for the same credit.  That's going to leave them with a balance due (and likely underpayment penalties) next April.

I'm still trying to figure out the limitation on reduction of increased credit and how the phase out of the safe harbor amount impacts the reconciliation of excess advance credit.  Somebody really went through the whole checklist of buzz words when they wrote this one.  But I have a 10-hour train ride later this month so I'm hoping that's enough time to make sense of this mess. 🙂  If anyone has any good detailed articles please let me know.  So far I've found some higher level "increase in CTC" overviews but nothing that digs deep into how all of the thresholds work.  The safe harbor phase out starts at a $40K/$50K/$60K threshold and the increased credit phase out uses a $75K/$112.5K/$150K threshold and then we hit the regular $200K/$200K/$400K phase out.

If we're not having fun yet, we soon will be!

Rick

[dkh]

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@rbynaker wrote:
That's going to leave them with a balance due (and likely underpayment penalties) next April.

If we're not having fun yet, we soon will be!

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I fear the balance due and underpayment penalties will happen for some of my clients if I don't recalculate their estimated tax payments.    This dawned on my about a week ago when I was reviewing the 2020 return with a client.  I was explaining the advance CTC payments that should be coming to them when BAM! it hit me this was going to cause problems.   I would have said Oh Sh!t out loud but there were children present.

[Just-Lisa-Now-]

thanks Rick!

[sjrcpa]

@PATAX  Don't take it personally. That's just Bob.

[BobKamman]

There is some good information on the new CTC in this blog post today

https://procedurallytaxing.com/advanced-child-tax-credit/ 

along with some graphics prepared by the Congressional Research Service (somewhat blurry, helps to click on them to open in a separate window).  

And an IRS official discussed this problem:

"IRS [is] still working on the process for resolving disputes over who is entitled to the advanced CTC payment.  While the vast majority of cases will probably work smoothly, family dynamics dictate that situations will exist where more than one person claims the credit for a child.  Given the abbreviated time frames within which the payment determinations are being made the ability of the IRS to create a system for resolving disputes during the 2021 period will provide quite a challenge and could severely strain its resources.  On the other hand, if the IRS cannot find a reasonable way to handle disputes, it will receive much criticism."

[garman22]

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@BobKamman wrote:

There is some good information on the new CTC in this blog post today

https://procedurallytaxing.com/advanced-child-tax-credit/ 

along with some graphics prepared by the Congressional Research Service (somewhat blurry, helps to click on them to open in a separate window).  

And an IRS official discussed this problem:

"IRS [is] still working on the process for resolving disputes over who is entitled to the advanced CTC payment.  While the vast majority of cases will probably work smoothly, family dynamics dictate that situations will exist where more than one person claims the credit for a child.  Given the abbreviated time frames within which the payment determinations are being made the ability of the IRS to create a system for resolving disputes during the 2021 period will provide quite a challenge and could severely strain its resources.  On the other hand, if the IRS cannot find a reasonable way to handle disputes, it will receive much criticism."

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should be an interesting read.......NOT!!!

Thanks @BobKamman 

[Taxprohere]

@IRonMaN

Turtles would be more suitable pets for retirees.  You only might have to prod them once in a while to see if they're alive.   The turtles too.

[IRonMaN]

Actually turtles are a pretty good match for putting on a leash and taking them for a walk.  Their speeds should match up pretty even.