2021 Advanced Child Tax Payments
- JoAnna White
- Aug 3, 2021
- 2 min read
In the tax community, this is the key phrase of the day... month... and potential year! If you have children, you may have already received your first ‘advance’.
Most of my mail is either junk or a bill! It is not often that I receive mail with a check enclosed (or a letter referencing a direct deposit of $$$). It’s almost an instant endorphin release, right?!
Unfortunately, that high may not last long for most.
BUSINESS OWNERS
If you typically owe taxes when you file, then you may want to refuse the advanced payments. They are as advertised... ADVANCES on a tax credit that offsets income taxes due. By acceptance the advance, you are just increasing the amount you will owe when your tax returns are filed. Do not set yourself up for a large tax debt and potential penalties. Consider the option to either refuse the payments, or accept and apply them to your quarterly estimates tax payments.
NOT A BUSINESS OWNER BUT TYPICALLY OWE TAXES
If you fall under this category, the same options should be considered. Refuse the payments or save them to apply towards your tax liability when your tax return is filed. You do not want to start off 2022 owing the IRS!
NOT A BUSINESS OWNER - TYPICALLY GET A REFUND
If you are in this category then you have some options. The advanced payments are for 1/2 of the child tax credit. You will claim the other half on your tax return. Just be prepared. When you accept the advanced payments, you will have less credit than usual to apply against tax liability. Your refund could be significantly less. In some cases, taxes may even be due when you file your tax return.
Obviously, if you need the payments to cover basic living expenses (food, clothing, shelter) then accept them and spend them on those needs. If you do not need the payments to survive, you may want to considering saving them until you are sure about your tax liability for 2021. At a minimum do your research and/or seek out the advice of a tax professional if you are unsure. Surprises should not apply to your taxes!
Comentários