You know all that child tax credit they gave you early?

[bethben]

I'm cautioning people on the shock I just got.  For the first time in my life with kids, I owed money on my federal taxes.  You see, every year, we calculate the child tax credit and what taxes we will most likely owe and figure out how much to withhold in taxes on my husband's paycheck.  We're always pretty close to owing little to no taxes or getting a small refund.  This year, the federal government all gave us that child tax credit early.  I saw many people on social media using that for "non-essentials" like piano lessons, girl scout dues, etc.  Here's the kicker.  Now, your tax burden is not reduced and the full amount is due.  I was pretty close to getting penalized for not paying enough taxes into the system!!!!  I couldn't figure out how we could have been so off in our withholdings since my husband's paycheck didn't increase that much.  Basically, they gave me money early so I could pay the full amount back to them later (we only have two dependent kids right now who were under the age of 17).  I am thinking of all the people who are going to be shocked by a tax bill along with penalties.  

 

 

[Miss Tick]

Same thing happened here! How frustrating. I would have opted out if I had better understood the tax implications.

[historically accurate]

If you had two kids eligible, you should still get $3000 in child tax credit at tax time because they upped the amount. In other years, you would've received $4000. So, there is a decrease, but it is only $500 per child. 

Other years: $2000 April 15

This year: $1500 in advance, $1500 April 15

 

Note if you have an under 6, the decrease is even lower $200 per child.

Other years: $2000 April 15

This year: $1800 in advance, $1800 April 15

Edited March 21, 2022 by historically accurate

[Brittany1116]

We were concerned about owing this year, and tried to opt out. Went through a too-long system of verification to deny early credit only to be told I don't exist. So they can give me money with no verification but I can't opt out without every personal identifier ever used, and audio and video of my face being confirmed by AI?? Anyway, we saved 90%ish of it, and our refund when we filed was about 60% of last year's with no other real changes to situation. Accountant urged us to consider changing withholdings because of where things fell this year.

[Arcadia]

10 minutes ago, SusanC said:

Same thing happened here! How frustrating. I would have opted out if I had better understood the tax implications.

We just kept the $2000 in savings to pay back at tax time. We owe Federal every year but not high enough to need to pay penalty. We didn’t want to risk opting out and then IRS dispute the amount. 
We did increase the tax withholding this year as DS17 would be turning 18.

[kbutton]

I am concerned how this will come down for us. I mostly just don't want to have to do quarterly payments ahead if we're short. 

[HomeAgain]

We weren't sure about it so we noped out.  Dh and I just didn't want it messing with our budget and figured we'd see how it would shake out the end.  I think I'm really glad now that we made that choice!

[Mrs Tiggywinkle]

18 minutes ago, historically accurate said:

If you had two kids eligible, you should still get $3000 in child tax credit at tax time because they upped the amount. In other years, you would've received $4000. So, there is a decrease, but it is only $500 per child. 

Other years: $2000 April 15

This year: $1500 in advance, $1500 April 15

 

Note if you have an under 6, the decrease is even lower $200 per child.

Other years: $2000 April 15

This year: $1800 in advance, $1800 April 15

We opted in because this was my understanding—that it was expanded to be a larger credit and so it really wouldn’t affect much at tax time. 

[Miss Tick]

28 minutes ago, Arcadia said:

We just kept the $2000 in savings to pay back at tax time. We owe Federal every year but not high enough to need to pay penalty. We didn’t want to risk opting out and then IRS dispute the amount. 
We did increase the tax withholding this year as DS17 would be turning 18.

We usually get a small federal refund, but this year, despite paying more than last, the child credit put us into penalty territory. Not a significant amount, but it's the principle of the matter!

[TechWife]

I thought the reporting on this was clear.  Tax credits aren't deductions, so they don't have any affect on your taxable income.  If you would otherwise owe taxes, you owe them. It's just that the child tax credit isn't used to pay them if you received your payment in installments.

Using the advance tax credit to pay for lessons, scouting, whatever is exactly why the credit was codified in the first place. It's supposed to lighten the financial burden of child rearing.

 

 

 

Edited March 21, 2022 by TechWife

[Arcadia]

5 minutes ago, SusanC said:

We usually get a small federal refund, but this year, despite paying more than last, the child credit put us into penalty territory. Not a significant amount, but it's the principle of the matter!

If your tax withholding is higher than previous, you do not need to pay penalty. We have that happened for many years. What we owe is about 5% of our total federal tax.

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

“You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.”

 

[bethben]

7 minutes ago, Arcadia said:

If your tax withholding is higher than previous, you do not need to pay penalty. We have that happened for many years. What we owe is about 5% of our total federal tax.

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty

“You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:

• Your filed tax return shows you owe less than $1,000 or
• You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.”

 

I paid 100% of the tax for 2020.  That's the only thing that kept me from a penalty.

[KSera]

17 minutes ago, SusanC said:

We usually get a small federal refund, but this year, despite paying more than last, the child credit put us into penalty territory. Not a significant amount, but it's the principle of the matter!

I'm super worried what the implications might be for us. We wanted to opt out, but I read of so many problems doing so that we instead just turned around and donated each child credit we got to the food bank, thinking that seemed like money we weren't supposed to get anyway and it would at least help offset the tax burden of whatever we owed due to having gotten it. Now I'm not sure if that's accurate at all. And we got just two tax credit checks--is that normal? For some reason, I thought they were going to come monthly for 6 months. This year is all in flux for us anyway, with kids aging out and job changes and these tax credits. Last year was the first time we ever owed instead of getting a refund, and I'm still not sure what we did wrong that caused that. I'm quite worried what the final line on our return will say.

[JustEm]

It didn't change our tax situation at all. 

[Arcadia]

6 minutes ago, KSera said:

. And we got just two tax credit checks--is that normal? For some reason, I thought they were going to come monthly for 6 months.

We have six payments/deposits (4 * $333.33 and 2 * $333.34 to make $2k) into our bank account. Check your IRS 6419 letter https://www.irs.gov/individuals/understanding-your-letter-6419

 

[Sneezyone]

6 minutes ago, hjffkj said:

It didn't change our tax situation at all. 

Same.

[Grace Hopper]

We didn’t have a chance to opt out before the first check arrived. We agreed to put all the money in the bank as if it never came, because I believe we will be in the position to owe it back (so to speak). If we have any left after filing our complete tax package, I will be amazed. 
 

It’s tough when your little deductions fly the coop! We are down to our last one and past taxes have looked different every time one outgrew our ability to claim them. 

[Grace Hopper]

58 minutes ago, Mrs Tiggywinkle said:

We opted in because this was my understanding—that it was expanded to be a larger credit and so it really wouldn’t affect much at tax time. 

Gosh I hope you are right (or that this truth you state also applies well to our tax situation - so many variables!). I’d love to come out even on taxes and not have to pay in much this year. 

[Grace Hopper]

12 minutes ago, hjffkj said:

It didn't change our tax situation at all. 

 

5 minutes ago, Sneezyone said:

Same.

So can I hope that since we saved the funds, and our tax situation is similar to last year’s, that we will be able to use those saved funds to pay our taxes?

(I assure y’all our child was well cared for despite not using those funds on other things😁)

[Mrs Tiggywinkle]

7 minutes ago, Grace Hopper said:

Gosh I hope you are right (or that this truth you state also applies well to our tax situation - so many variables!). I’d love to come out even on taxes and not have to pay in much this year. 

https://www.whitehouse.gov/child-tax-credit/
 

This explains some of it.  The credit expanded some; you got half throughout the year and half is applied at tax time. However—that half is somewhat less than what you’re accustomed to because they didn’t expand it by twice the amount.

[JustEm]

7 minutes ago, Grace Hopper said:

 

So can I hope that since we saved the funds, and our tax situation is similar to last year’s, that we will be able to use those saved funds to pay our taxes?

(I assure y’all our child was well cared for despite not using those funds on other things😁)

I mean if you saved the funds then if you end up owing for last year than you shouldn't have an issue. For us, we used the funds because we knew the other half of the credit would cover our tax bill if we had one. 

[desertflower]

35 minutes ago, hjffkj said:

It didn't change our tax situation at all. 

We just got a little less than usual.  Which we expected. 

[Loowit]

We owe, and I had a feeling that we would.  The amount is a bit more than expected.  However, we made adjustments to DH's paycheck deductions for this year, so we shouldn't owe next year when we file.  I wish we had done a better job last year of planning ahead, but not much we can do about that now.  We will just have to pay more attention going forward.

[Tap]

In our area, it was well advertised to be an advance. I suppose some people in our area, may have not looked into it, and thought it was just extra cash, but it would have been hard to miss. 

Sorry, for anyone is struggling due to it. ((((Hugs)))) Even without that advance, it shouldn't be too much difference on the tax bill.  But I completely understand that even $30 can hurt some budgets. 

[bethben]

I had no idea that it was even coming.   All of a sudden I just started getting deposits in my checking account.  I don't even remember having an opt out form.  I may have gotten one, but I was getting so much random mail about stimulus checks and all of that I may have ignored it.  We can pay the bill, but I've heard of plenty of people who were happy to have it as "extra income" for piano lessons, girl scout camps, etc.  I am feeling so gut wrenchingly sad for them now because they have a tax bill they were not expecting and no money to pay for it.  

[Sneezyone]

I have a feeling this primarily affects people at the upper end of the earned income limit where the credit was phased out.

[SKL]

I saw lots of warnings about this in the media.

That said, our government needs to do a better job of informing people about many aspects of taxation.

[Carrie12345]

40 minutes ago, Sneezyone said:

I have a feeling this primarily affects people at the upper end of the earned income limit where the credit was phased out.

That’s how it’s looking to me, too.
We took half of the amount we qualified for, because I just didn’t feel like going through a second opt out process, and we weren’t expecting much more income from the year before.  And then dh got an unexpected payout toward the end of the year, so we have to give it back. But we have the payout from which to pay it, so I can’t legitimately complain.

No chance of a payout next year though. So, if any of the chatter about re-upping that system comes to fruition, and they use 2021 income, we’ll miss that, too!

Timing has never been my forte.

[Tap]

53 minutes ago, bethben said:

I had no idea that it was even coming.   All of a sudden I just started getting deposits in my checking account.  I don't even remember having an opt out form.  I may have gotten one, but I was getting so much random mail about stimulus checks and all of that I may have ignored it.  We can pay the bill, but I've heard of plenty of people who were happy to have it as "extra income" for piano lessons, girl scout camps, etc.  I am feeling so gut wrenchingly sad for them now because they have a tax bill they were not expecting and no money to pay for it.  

There wasn't a form to opt out. You had to go to a website to do it, and some people found it really daunting to work through. 

Edited March 22, 2022 by Tap

[Brittany1116]

I should clarify a few things. We "got back", in all, about 2700 more than last year. The few people I know who have same family size got back 1800-2900 more than previous year because of the early payments. 

One friend logged in to opt out and was done in 2 minutes. When I tried, I had to go through pages of info, take video and photos, etc. It took nearly an hour. And it still didn't work. AND my husband would have had to the same thing for his half. AND it would have to be done more than once because there were (I believe) 3 deadlines to opt out.

Also, I read there is a bill (unsure of the status) that would require anyone using the IRS website to jump through the same hoops for any interactions with their online profile, starting this summer. Anyone know more about that?

 

Edited March 22, 2022 by Brittany1116
Grammar

[Sneezyone]

8 minutes ago, Tap said:

There wasn't a form to opt out. You had to go to a website to do it, and some people found it really daunting to work through. 

It was discussed on this forum, in depth, too.

[frogger]

3 hours ago, SusanC said:

We usually get a small federal refund, but this year, despite paying more than last, the child credit put us into penalty territory. Not a significant amount, but it's the principle of the matter!

This is beyond irritating. If you pay before taxes are due it is absolutely crazy that they can tack on a penalty especially if they are the ones changing things around! 

 

[Sneezyone]

3 minutes ago, frogger said:

This is beyond irritating. If you pay before taxes are due it is absolutely crazy that they can tack on a penalty especially if they are the ones changing things around! 

 

There is no penalty (interest) for not paying what you didn't know you owe. There are still three weeks before the filing deadline. Penalties won't accrue until after 4/15.

Edited March 22, 2022 by Sneezyone

[frogger]

Just now, Sneezyone said:

There is no penalty (interest) for not paying what you didn't know you owe. There are still three weeks before the filing deadline. Penalties won't accrue until After 4/15.

There is a penalty for not with holding enough regardless of child tax credits.

[freesia]

We got a letter explaining it and telling how to opt out.  Maybe you missed or didn't get the letter.

[Sneezyone]

1 minute ago, frogger said:

There is a penalty for not with holding enough regardless of child tax credits.

only for EMPLOYERS who fail to withhold. Not for individual filers.

[Sneezyone]

2 minutes ago, freesia said:

We got a letter explaining it and telling how to opt out.  Maybe you missed or didn't get the letter.

We got one too. SMH. We also watch/pay attention to news.

[freesia]

Actually, we got two letters one for each child for whom we get credits and they went to different parents—no idea why. 

[Sneezyone]

12 minutes ago, freesia said:

Actually, we got two letters one for each child for whom we get credits and they went to different parents—no idea why. 

same.

[vonfirmath]

5 hours ago, bethben said:

I'm cautioning people on the shock I just got.  For the first time in my life with kids, I owed money on my federal taxes.  You see, every year, we calculate the child tax credit and what taxes we will most likely owe and figure out how much to withhold in taxes on my husband's paycheck.  We're always pretty close to owing little to no taxes or getting a small refund.  This year, the federal government all gave us that child tax credit early.  I saw many people on social media using that for "non-essentials" like piano lessons, girl scout dues, etc.  Here's the kicker.  Now, your tax burden is not reduced and the full amount is due.  I was pretty close to getting penalized for not paying enough taxes into the system!!!!  I couldn't figure out how we could have been so off in our withholdings since my husband's paycheck didn't increase that much.  Basically, they gave me money early so I could pay the full amount back to them later (we only have two dependent kids right now who were under the age of 17).  I am thinking of all the people who are going to be shocked by a tax bill along with penalties.  

 

 

People at the time said to be careful. That it was going to affect refunds, etc.  I am actually surprised that so few people I have heard were affected like you.

 

[bethben]

45 minutes ago, frogger said:

There is a penalty for not with holding enough regardless of child tax credits.

Yes, this.  I find it irritating that you can still pay what you owe before tax day and still have the opportunity to pay more because you don’t have a masters degree in accounting to try and figure out what’s owed.  What tax laws did they pass for this year that will change things up again?  Who knows!

[vonfirmath]

1 hour ago, Brittany1116 said:

I should clarify a few things. We "got back", in all, about 2700 more than last year. The few people I know who have same family size got back 1800-2900 more than previous year because of the early payments. 

One friend logged in to opt out and was done in 2 minutes. When I tried, I had to go through pages of info, take video and photos, etc. It took nearly an hour. And it still didn't work. AND my husband would have had to the same thing for his half. AND it would have to be done more than once because there were (I believe) 3 deadlines to opt out.

Also, I read there is a bill (unsure of the status) that would require anyone using the IRS website to jump through the same hoops for any interactions with their online profile, starting this summer. Anyone know more about that?

 

I needed to get something for my taxes NOW and had to go through a process including a picture to set up an account.

[frogger]

51 minutes ago, Sneezyone said:

only for EMPLOYERS who fail to withhold. Not for individual filers.

Well, tell that to the IRS cause I've paid it. 

[Clarita]

56 minutes ago, Sneezyone said:

There is no penalty (interest) for not paying what you didn't know you owe. There are still three weeks before the filing deadline. Penalties won't accrue until after 4/15.

That's not true. There are certain things that you have to pay estimated taxes for quarterly and will be penalized if you don't. One example would be when you" sell a valuable asset", which includes things like stock. Stocks are a potential area where it can get complicated in terms of a sale or earning is counted against you even when in some cases you did not actually receive an "actual" payout. An easy example is when companies give their employees discounted stocks, that discount counts toward you "making money" even though there was not an actual cash payout.

6 minutes ago, bethben said:

What tax laws did they pass for this year that will change things up again?  Who knows!

Ugh not to mention some information you don't get from companies until February or even April because that is the official deadline for them to give it to you. My CPA is earning her pay.

Edited March 22, 2022 by Clarita
Change Essentially to one of the reasons because tax law is so complicated there must be other cases as well.

[Noreen Claire]

24 minutes ago, freesia said:

Actually, we got two letters one for each child for whom we get credits and they went to different parents—no idea why. 

We got two letters, one for each parent, that split the total amount we received for four kids in half.

[Sneezyone]

2 minutes ago, vonfirmath said:

I needed to get something for my taxes NOW and had to go through a process including a picture to set up an account.

This is, in part, for your safety. SSN/online tax fraud is a thing.

[frogger]

5 minutes ago, bethben said:

Yes, this.  I find it irritating that you can still pay what you owe before tax day and still have the opportunity to pay more because you don’t have a masters degree in accounting to try and figure out what’s owed.  What tax laws did they pass for this year that will change things up again?  Who knows!

I can figure out the deductions but I didn't know until it was too late that the due date wasn't the due date. They certainly don't mind getting a free loan from you.

[Sneezyone]

4 minutes ago, Clarita said:

That's not true. There are certain things that you have to pay estimated taxes for quarterly and will be penalized if you don't. Essentially, it's when you" sell a valuable asset", which includes things like stock. Stocks are a potential area where it can get complicated in terms of a sale or earning is counted against you even when in some cases you did not actually receive an "actual" payout. An easy example is when companies give their employees discounted stocks, that discount counts toward you "making money" even though there was not an actual cash payout.

Ugh not to mention some information you don't get from companies until February or even April because that is the official deadline for them to give it to you. My CPA is earning her pay.

AGAIN...ppl who are at the UPPER end of the tax bracket eligible for the credits who should be paying attention anyway. If you sell a valuable asset (as we are) and don't shield the proceeds in a trust or LLC or pay taxes on the gains, that's on *you* not the IRS.

So annoyed with the bitching. Open your damn mail. Read it. Save it. Research it. Problem solved.

Edited March 22, 2022 by Sneezyone

[Clarita]

Just now, Sneezyone said:

So annoyed with the bitching. Open your damn mail. Read it. Save it. Research it. Problem solved.

There is no mail for this. It is up to the filer to figure out and estimate.

[frogger]

That AI identity thing was strange. Had to make my account this year so I could get my letter they never sent to me. I looked for it for a few weeks when my DH's came since I saw his but nope.