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"CHILD TAX CREDIT ADVANCE”
The IRS recently sent out a letter notifying you of how these advance child tax credit payments work. They also advised you at the bottom of the letter on how to opt out of this program for those who would prefer to just get a larger refund with their tax return.
Most people don't understand that this is NOTHING like the stimulus payments. All this is, is the IRS sending you your tax refund earlier than usual. And for most of our clients, they would prefer to keep the larger refund at the end of the year rather than get some of it spread out over 6 months. (Now don't get me wrong, there are some people that are very excited about this because they either A.)Really need the funds right now. and/or B.)They believe in never giving the IRS a free loan. And these are the types of clients we have that try to get their refund to be as close to zero as possible. There is nothing wrong with that theory at all, in fact, it's technically the correct and best financial decision to make, but probably only 5% of our clientele really actually live by this rule. Instead, most like to get that big refund at tax time and then they can really do something with it! And in this way they are looking at it like a forced savings account.)
So let me use some examples to show you how this could affect you.
1.) Let's say that you are married with 2 kids aged 10 and 14 years old. Your taxable income is $35,000, and you're used to getting tax refunds of $2,000 to $3,000 thanks to the child tax credit and the earned income credit. If you take the advance payments for your children from the IRS this year, you would get $3,000 spread out over the rest of this year; so $500 a month until December. But when you do your taxes with me in January, your refund will only be $1,000 to $2,000 dollars! And for someone that makes $35,000 a year and has a family of 4, this is a lot of money to be planning on $3,000, but you only end up with $1,000. So just make sure you plan for this. (And make sure you don't blame your accountant come tax time and your refund isn't what you wanted!)
2.) Now let's use another example, let's say that you are married with 3 kids. The children's ages are 11 years old, 8 years old, and 15 years old. (Must be a Utah family, am I right? :)) Your taxable income is $100,000. And your refunds are usually only about 200 dollars because you make sure that just barely enough is withheld from your paychecks to cover the tax you owe come tax time.
You can expect to get $750 dollars per month through the advance payments! For a total of $4,500 by December. Now when you come to me to do your taxes in February of 2022, you will owe the IRS $1300 dollars! Holy cow will this client be upset!
My hope with this post is to just help inform my clientele and friends. The client from this example number 2 won't be upset at all if this is planned for and understood right? So if you need money now, take the advance payments, no problem in that at all. Just make sure you know what your outcome will be come tax time.
Advance Child Tax Credit Payments in 2021 | Internal Revenue Service Find details about the advance Child Tax Credit payments, including how to get them or stop getting them.
IRS refunds will start in May for $10,200 unemployment tax break The IRS will issue refunds automatically starting in May to workers who qualify for a new tax break on jobless benefits but had already filed their tax returns.
We will be closed Thursday and Friday due to weather and no water.
Thank you for your understanding.
Our office will be closed today and tomorrow.
IRS Announces Filing Season Open Date (It’s Later Than Expected) The Internal Revenue Service (IRS) has announced that tax season will open on Friday, February 12, 2021.
Second Draw PPP Loans Information:
Second Draw PPP Loans Eligible businesses may apply for a Second Draw PPP loan.
irs.gov Steps to receive the Economic Impact Payment if you haven't filed a tax return for 2018 or 2019, and aren't receiving Social Security, SS Disability Income or Railroad Retirement benefits. This payment is also referred to as "stimulus checks" or "coronavirus relief."
Correction. They have updated this.
Small Business Owners:
sba.gov Paycheck Protection Program (PPP) Sample Application Form
I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.
Economic impact payments: What you need to know:
irs.gov IR-2020-61, March 30, 2020 — The Treasury Department and the Internal Revenue Service today announced that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people.
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[01/30/14] Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund... Tax Day starts tomorrow!!!
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