Child Tax Credit Checks

[UNSTUCK]

I guess I live under a rock(crawler). A check showed up at the house that we weren't expecting. Part of me says run to the bank as fast as I can and cash it, but being from the Fed, the other half of me says proceed with caution. So what's the deal with these checks and should I cash it? What if I don't cash it?

I usually end up owing on my tax returns. I like to give the Gov as little money as I can throughout the year. So I'm assuming getting this tax credit now will hurt me even more come tax time. Is that right? I don't need the money.

Anything else I need to know about it?

 

[jeeper]

You can opt out of the checks online.

I think many people are in for a rude awakening when they will owe for the first time in their life after getting all their credits up front.

 

[N-Smooth]

Yes, you will pay for it at tax time. Thanks for reminding me that I need to opt out.

I agree with @jeeper that a lot of (stupid) people that have no idea how taxes work are going to be shocked next April. That was my first impression when they announced the program.

 

[Kevin B.]

So what's the deal with these checks and should I cash it?

So what they did is increase the child tax credit and set up advances on that credit, with the idea that disadvantaged families will be served better by getting that credit paid out monthly throughout the year instead of all at once. What that does to your tax bill next February depends on lots of things. We don't generally owe and I wanna keep it that way, so we're stuffing those advances into a savings account until we do our taxes and know exactly how we're affected. We'll decide then whether to leave them in place or opt out of the advance payments or what. I agree with Brian, I think a lot of people think it's free money and are going to be in for a nasty surprise come tax season.

2021 Child Tax Credit and advance Child Tax Credit payments frequently asked questions | Internal Revenue Service

Find answers about advance payments of the 2021 Child Tax Credit.

www.irs.gov

And not to get too political, but this smells a lot like a gateway to universal basic income and I don't like it.

 

[anderson750]

Where do you go to unenroll? My initial understanding was that if your child turned 18 in 2021 you would not get a check. My daughter is 20 and my son turns 18 in December so I was surprised when a check showed up last week.

 

[SAMI]

As I understand it these checks are the difference of the raised child tax credit amount. Therefore it does not count as income which means you are not paying taxes on this money. You shouldn't have to pay it back unless you've received more funds than you should've.

I could be wrong, but this is what I understand based on some light research.

 

[I Lean]

I'm doing the same thing, keeping the .gov money until tax time. I'm not bothering opting out yet, since this is (currently) only happening this year. BUT, naturally O'Biden is pushing to make it permanent, so we'll see.....

 

[I Lean]

As I understand it these checks are the difference of the raised child tax credit amount. Therefore it does not count as income which means you are not paying taxes on this money. You shouldn't have to pay it back unless you've received more funds than you should've.

I could be wrong, but this is what I understand based on some light research.

You won't pay taxes ON it, and you won't "pay it back", but it will not be a reduction in your taxes next April like it otherwise would have been.

 

[SAMI]

Where do you go to unenroll? My initial understanding was that if your child turned 18 in 2021 you would not get a check. My daughter is 20 and my son turns 18 in December so I was surprised when a check showed up last week.

Today's the last day to opt out of the December child tax credit check. What to know

You're running out of time to unenroll from the December payment. Here's what you need to do.

www.cnet.com

 

[SAMI]

You won't pay taxes ON it, and you won't "pay it back", but it will not be a reduction in your taxes next April like it otherwise would have been.

Correct. But it's only 50% of the CTC, correct?

 

[Kiel]

I thought it was your child tax credits you get at the end of the year applied to your taxes, but in monthly allotments?

 

[Kevin B.]

since this is (currently) only happening this year

I think the increase in CTC is only this year. I thought the option to get it monthly in advance is here to stay though?

 

[Pike2350]

I thought it was your child tax credits you get at the end of the year applied to your taxes, but in monthly allotments?

basically this.

The CDC is now $3000-3600 depending on the age of the child (previous years this was $2k) In essence, you are getting the $3600 (in my case) in $300 payments through the year. Since they started in July, it will be 50% of the amount as SAMI said. For my example, I will get $1800 of the $3600 CDC early. So when I file taxes for 2021, I will only get $1800 CDC to deduct from my taxes.

This will affect you if you owe each year because it will make what you greater at tax time. It could also very easily swing some people from getting a refund to owing instead.....which may be my case in 2022 if they continue this.

If you have a tax liability of $10k without kids, add a child under 5 ($3600 CDC), you would only have a tax liability of $6400. If you paid $7k in taxes, you would get a $600 refund. However, in 2021, if you opt in for the monthly payments and all other figures were the same, you'd have a tax liability of $8200, because you already received $1800 in tax credit over the last 6 months of 2021. If you paid in $7k, you would then OWE $1200 come tax time.

I hope that helps illustrate it.

{edit} another thing to note....if your AGI for 2021 come tax time was greater than $150k as a household, you will only qualify for $2k in CDC, so, again, if you already took $1800 of that, you'd only get $200 credit at the time of taxes.

 

[Unimog]

Hmm. Just checked my bank account and, sure enough, they deposited a child tax credit to me on the 15th. I despise these games they play with our money to try and get people to think they are getting something for nothing.

 

[I Lean]

Hmm. Just checked my bank account and, sure enough, they deposited a child tax credit to me on the 15th. I despise these games they play with our money to try and get people to think they are getting something for nothing.

The weird part about this one to me, is that my prior Stimulus BS money went directly into my bank account. This one came in the mail, in the form of a check. ???

 

[Herzog]

I despise these games they play with our money to try and get people to think they are getting something for nothing.

100% Agreed

 

[Gravy]

Cut the end off the blanket and sew it to the other side gives you a bigger blanket.

 

[Herzog]

It's probably stupid, but I'm not cashing the checks. I'm just gonna keep them until spring when I file and cash them then. I pay every year anyways and just put away the amount of the normal 'deductions' into a different account.

 

[I Lean]

It's probably stupid, but I'm not cashing the checks. I'm just gonna keep them until spring when I file and cash them then. I pay every year anyways and just put away the amount of the normal 'deductions' into a different account.

Take a close look at the check before doing that, they might expire.

 

[UNSTUCK]

So if I opt out by Aug 2, that prevents me from getting any more checks. I like that idea, but then what do I do with the check I have now? If I don't cash it will it still count against me?