Opt out for Advance Child Tax Credit payments available at IRS.gov

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Unhandled
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Unhandled »

GetMeToRetirement wrote: Tue Jun 22, 2021 1:14 pm I appreciate the response, but my question is different. Assume your 2020 AGI was over the threshold - do you still need to opt out?
The short answer is: No you don't need to opt out. You aren't going to receive them in the first place.

If you didn't quality for the credit in 2020, then you aren't going to qualify in 2021 either. The IRS won't send you any pre-payments for a credit that they don't expect (based on 2020) you will qualify for.
RetiredAL
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by RetiredAL »

SanAntionetta wrote: Tue Jun 22, 2021 1:12 pm
Its based on your 2020 AGI...so people whose income fluctuates or has risen in 2021 are the people that will be most affected.
What if the IRS don't yet have your 2020 return. Will they use 2019?
alfaspider
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Re: Why do some people not like the advanced payments for child tax credit?

Post by alfaspider »

aristotelian wrote: Tue Jun 22, 2021 11:55 am
alfaspider wrote: Tue Jun 22, 2021 11:30 am If you typically make a payment at tax time, it could put you at risk of an underpayment penalty unless you offset it with additional withholding.
Not so much in this case. The tax credit is increasing so that offsets most of the prepayment. Net effect on liability at the end of the year should be minor if you don't change withholdings.
High income folks don't qualify, but may be getting checks anyways.
marcopolo
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by marcopolo »

sapphire96 wrote: Tue Jun 22, 2021 8:54 am
anon_investor wrote: Tue Jun 22, 2021 8:49 am
sapphire96 wrote: Tue Jun 22, 2021 8:48 am
anon_investor wrote: Tue Jun 22, 2021 8:46 am
aprilcpa wrote: Tue Jun 22, 2021 8:44 am I am not sure how many here it would affect, but the sign up for opting out of the advance child tax credit payments is now available here: https://www.irs.gov/credits-deductions/ ... ts-in-2021

Basically, the IRS is going to pay those who qualify advance payments of their child tax credit beginning in July 2021. Payments will be made automatically unless the taxpayer opts out.
Why would you not want the extra cash flow now?
Take with a grain of salt, but I believe some taxpayers may be in the position of receiving the monthly checks today, but if their income rises for tax year 2021, they have to pay all of that money back come tax time this coming April. Someone please fact check me. :happy
But with the time value of money, wouldn't it be better to have an interest free loan from the Federal government for 9 months?
Mathematically, I agree with you. But what is the money going to be invested in? Best reasonable case is a savings account earning 0.5%. Risky to invest in stocks. I Bonds have the one year lock up. Is going through all of the hassle worth a few tens of dollars?
One should also consider the possibility that the rules are changed such that payback is not necessary. It is an odd thing, but there are a couple of recent precedents where if tax payer got more advance payments than they were entitled to, they did not need to pay it back. But, if they never received it, they don't get it later.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Soon2BXProgrammer
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Soon2BXProgrammer »

marcopolo wrote: Tue Jun 22, 2021 2:28 pm
sapphire96 wrote: Tue Jun 22, 2021 8:54 am
anon_investor wrote: Tue Jun 22, 2021 8:49 am
sapphire96 wrote: Tue Jun 22, 2021 8:48 am
anon_investor wrote: Tue Jun 22, 2021 8:46 am

Why would you not want the extra cash flow now?
Take with a grain of salt, but I believe some taxpayers may be in the position of receiving the monthly checks today, but if their income rises for tax year 2021, they have to pay all of that money back come tax time this coming April. Someone please fact check me. :happy
But with the time value of money, wouldn't it be better to have an interest free loan from the Federal government for 9 months?
Mathematically, I agree with you. But what is the money going to be invested in? Best reasonable case is a savings account earning 0.5%. Risky to invest in stocks. I Bonds have the one year lock up. Is going through all of the hassle worth a few tens of dollars?
One should also consider the possibility that the rules are changed such that payback is not necessary. It is an odd thing, but there are a couple of recent precedents where if tax payer got more advance payments than they were entitled to, they did not need to pay it back. But, if they never received it, they don't get it later.
Agree, however, with only giving half of the credit up front, they are hoping that while they gave you half up front the number of people who don't qualify for a child tax credit at all, will be small, and so they are just not going to give you your other half at filing time..
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the-worst-investor
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by the-worst-investor »

I found out today through the second portal that my family is eligible. I have a question for anyone who might know:

We recently had a baby in 2021, and couldn't find any option with the second portal to update our dependent information. Does anyone know when this option might open up? From what I've read, there are only going to be two portals released.
awval999
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by awval999 »

If anyone reads this, I beg you to save your time and create a standard IRS account instead of trying that ID.me atrocity.
Soon2BXProgrammer
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Soon2BXProgrammer »

awval999 wrote: Wed Jun 23, 2021 8:28 pm If anyone reads this, I beg you to save your time and create a standard IRS account instead of trying that ID.me atrocity.
I've had an ID.me account since 2013 when it was called "TroopID". It took 2 minutes to create my spouses ID.me account.
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phantom0308
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by phantom0308 »

People with highly variable income would likely already be aware of tax program with phase outs and know how to cope with it.
This is an advance of a tax credit, so it doesn't raise your AGI afaik. Stimulus largely worked and disposable income rose or stayed flat from 2019 to 2020, so I don't think there's likely to be a major boost from 2020 to 2021. I know the economy is doing well but wages even in the best of times don't rise super fast. All this is to say that I think you're overestimating the number of people that'll be paying back their credits.
Savermom
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Re: Why do some people not like the advanced payments for child tax credit?

Post by Savermom »

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Last edited by Savermom on Fri Jul 16, 2021 8:15 pm, edited 2 times in total.
awval999
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by awval999 »

Soon2BXProgrammer wrote: Wed Jun 23, 2021 11:44 pm
awval999 wrote: Wed Jun 23, 2021 8:28 pm If anyone reads this, I beg you to save your time and create a standard IRS account instead of trying that ID.me atrocity.
I've had an ID.me account since 2013 when it was called "TroopID". It took 2 minutes to create my spouses ID.me account.
Did it have you record a selfie on the rainbow screen?
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anon_investor
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by anon_investor »

Soon2BXProgrammer wrote: Wed Jun 23, 2021 11:44 pm
awval999 wrote: Wed Jun 23, 2021 8:28 pm If anyone reads this, I beg you to save your time and create a standard IRS account instead of trying that ID.me atrocity.
I've had an ID.me account since 2013 when it was called "TroopID". It took 2 minutes to create my spouses ID.me account.
Is ID.me just a 3rd party ID verification service? Sounds like a future data leak waiting to happen...
ponyboy
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by ponyboy »

Im not opting out. Ill take free money any day of the week. Still waiting for 3rd stimulus..will probably have to claim that on our taxes next year. Ridiculous.
Soon2BXProgrammer
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Soon2BXProgrammer »

anon_investor wrote: Thu Jun 24, 2021 5:47 am
Soon2BXProgrammer wrote: Wed Jun 23, 2021 11:44 pm
awval999 wrote: Wed Jun 23, 2021 8:28 pm If anyone reads this, I beg you to save your time and create a standard IRS account instead of trying that ID.me atrocity.
I've had an ID.me account since 2013 when it was called "TroopID". It took 2 minutes to create my spouses ID.me account.
Is ID.me just a 3rd party ID verification service? Sounds like a future data leak waiting to happen...
originally it was a method to prove that you had a military credential to a third party. slowly their platform has grown/changed to support various credentials/validations like student/teacher/first responder/etc.
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Soon2BXProgrammer
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Soon2BXProgrammer »

ponyboy wrote: Thu Jun 24, 2021 6:21 am Im not opting out. Ill take free money any day of the week. Still waiting for 3rd stimulus..will probably have to claim that on our taxes next year. Ridiculous.
its not "free" money if your working and paying in federal income tax in excess of the payment amount. It is your money, it is going from your paycheck to the federal government, and back.

its your money.
Chartered Financial Consultant (ChFC®), Retirement Income Certified Professional (RICP®) -- I am not your advisor.
pshonore
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by pshonore »

The Finance Buff in an article out today advises NOT to opt out.

https://thefinancebuff.com/no-2021-adva ... t-out.html
The Big Apple
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by The Big Apple »

the-worst-investor wrote: Tue Jun 22, 2021 6:19 pm I found out today through the second portal that my family is eligible. I have a question for anyone who might know:

We recently had a baby in 2021, and couldn't find any option with the second portal to update our dependent information. Does anyone know when this option might open up? From what I've read, there are only going to be two portals released.
Topic F of the Frequency Asked Question says that you will be able to update it in the My IRS portal.
Question A16 says you will be able to update dependent information in 'late summer'.
freight_train
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by freight_train »

pshonore wrote: Thu Jun 24, 2021 7:44 am The Finance Buff in an article out today advises NOT to opt out.

https://thefinancebuff.com/no-2021-adva ... t-out.html
Yeah, I was going to opt out but now seeing how painful the process is and all these points, I'm just going to take any payments I get and put them in savings until tax time when I expect I'll be paying it back. That seems easier.
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ClevrChico
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by ClevrChico »

I decided to opt out. Our AGI is in the middle of the range to receive $2k/child, and I don't see any chance of our current eligibility/income changing when we file our returns.

We pay quarterly taxes, so getting part of the tax tax credit now may mean underpayment penalties later? In our situation, it seemed easier to just opt out.
seity
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by seity »

I decided I wanted to opt in anyway. I can use the money to buy my kids their school clothing for the fall and put it towards fall sports. I can put it to good use now instead of getting it as a lump sum when I file my taxes in February.
Last edited by seity on Mon Jun 28, 2021 10:53 am, edited 1 time in total.
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teen persuasion
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Re: Why do some people not like the advanced payments for child tax credit?

Post by teen persuasion »

Savermom wrote: Thu Jun 24, 2021 4:45 am
VoiceOfReason wrote: Tue Jun 22, 2021 11:16 am There are a number of reasons. If you know you won't qualify and will have to pay it back, it's a waste of time, energy and another thing to remember when filing taxes for a few dollars in interest.

You need to ask yourself why the government is doing this? The government does this and many of these gimmick advanced tax payments because they are trying to trick the general public. They know that if they inject a small amount of money into each paycheck, or small check each month, that 90% of the population will just take that money and spend it. They count on that behavior, that is the reason it's being done.

I'm not eligible, but I don't need to participate in that even if I was.
Why they are doing this- they are changing this from a nonrefundable credit to refundable. This means huge amounts of money for those who pay little to no taxes. They are getting a monthly payout from the government.

Example- 2020 someone has 3 kids 6-17 and owes 2,000 in taxes. Tax credit 3 x 2,000 = 6,000. Tax due is 0. They don’t get 4,000 back because the credit is nonrefundable.

2021- the same person owes 2,000 less a tax credit of 3 x 3,000 = 9,000. They now get 2,000-9,000 = 7,000 refunded more than they paid.

0 taxes? You get 3,000/3,600 per kid

So the people who are doing it want an expansion of governmental assistance.

I am not taking it in advance as I will just owe more in April.
CTC was partially refundable, partially nonrefundable.

When it was max $1k, it was possibly 100% refundable.
When it was increased to $2k, $1400 was refundable, $600 nonrefundable.
Now it is again 100% refundable.
Ron Ronnerson
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by Ron Ronnerson »

freight_train wrote: Sat Jun 26, 2021 12:08 pm
pshonore wrote: Thu Jun 24, 2021 7:44 am The Finance Buff in an article out today advises NOT to opt out.

https://thefinancebuff.com/no-2021-adva ... t-out.html
Yeah, I was going to opt out but now seeing how painful the process is and all these points, I'm just going to take any payments I get and put them in savings until tax time when I expect I'll be paying it back. That seems easier.
Thanks for posting this link. The reasons given in the article highlight what I mentioned earlier in this thread. On 6/22/21, I'd said:

I’m not sure how high the chances are but there exists the possibility that the under-withholding penalty might be forgiven. There is even the chance that those who receive the credit upfront but then find out they’re ineligible due to having too much income might be forgiven too. The possibility of “forgiveness” is part of the consideration these days.

Some recent examples of forgiveness:

https://www.healthinsurance.org/faqs/wh ... -repay-it/

https://finance.yahoo.com/news/biden-ju ... 00191.html

https://www.foxnews.com/us/california-w ... g-eviction

I think it is best in most cases to do nothing. There is even a chance greater than 0% that whatever additional tax liability one incurs as a result of receiving the child tax credit up front might be forgiven.

The first link that I posted above shows that people who ended up not qualifying for a subsidy per the ACA or those who qualified for a smaller subsidy than what they received were forgiven for the difference. Someone who estimated their large family's income fairly low but actually ended up making far more than what they put down as the estimate would have been forgiven when they filed taxes and allowed to keep tax credits worth perhaps tens of thousands of dollars.

The other links I posted show that if you owe money toward unpaid rent or student loans, maybe that debt could be forgiven too. If you don't owe anything, you can't receive the blessings of forgiveness.

I definitely wouldn't count on forgiveness but am just saying the possibility is one thing to consider. Maybe you'll get lucky. If not, at the very least you will have saved time and energy and possibly frustration in not having to bother entering information onto an apparently clunky IRS site.
solarcub
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by solarcub »

indyfish wrote: Tue Jun 22, 2021 12:42 pm The process to unenroll took me 30 minutes or so. A pain in the behind to go through ID.me. I seemed to take my driver’s license photo about 10 times. I needed to upload pictures of two more documents and go through a video call as well. I don’t want my spouse to go through the same process of unenrolling, so we will have to settle for unenrolling only half the payments.
Exactly. That was a serious pain. I guess that's good that the IRS is being careful, but I wasn't expecting that much hassle.

To answer another question, I feel like sending all these payments out to people who don't need them is bad public policy, and I am fine with just getting the credit when I file, so I figured I would opt out. Also, my wife is working as a contractor with zero withholding, so getting the credit at filing time means I don't have to worry about estimated tax payments.

Had I known how hard it would be I would not have bothered.
invest4
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by invest4 »

I started the process to opt-out, but could not make it to the other end of the "rainbow". Coupled with further reading of this thread, I will just let it ride. Meh.
akpk
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Re: Opt out for Advance Child Tax Credit payments available at IRS.gov

Post by akpk »

I tried opt-out. Signup with Id.me was such a pain and took about an hour or so. Once i got Id.me and submitted unenroll request, i got a message saying that "request submitted - please check back in 5-7 days".
Today when I went to check in the status, I see following message for both spouse and me.
An error has occurred and we were unable to process your request. Please resubmit your request.


Debating whether to resubmit the request or just let it be like this.
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