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IRS provides information about advance child tax credit payments

Posted by Sean M. Godwin Posted on May 07 2021

IRS website: Advance Child Tax Credit Payments in 2021

The IRS has published a webpage to provide guidance to taxpayers on advance child tax credit (CTC) payments in 2021.

Background—child tax credit.

Taxpayers are allowed a CTC—temporarily expanded and made refundable for 2021 by the American Rescue Plan Act for each qualified child. The credit phases out for taxpayers with adjusted gross incomes (AGIs) over certain thresholds.

For 2021, a qualifying child with respect to a taxpayer is defined as an under-age-18 child, whom the taxpayer may claim as a dependent (i.e., a child related to the taxpayer who, generally, lived with the taxpayer for at least six months during the year), and who is a U.S. citizen or national, or a U.S. resident.

Background—advance payments of CTC.

The IRS is required to establish a program to make periodic advance payments which in total equal 50% of IRS's estimate of the eligible taxpayer's 2021 CTCs, during the period July 2021 through December 2021. (Code Sec. 7527A)

Advance payments from July to December.

IRS has announced that advance payments of the CTC will be made regularly from July through December 2021 to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50% of the CTC. Advance payments will be estimated from information included in eligible taxpayers' 2020 tax returns (or their 2019 returns if the 2020 returns are not yet filed and processed).

Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.

Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. The IRS says more details on how to take these steps will be announced soon.

Repayment of Excess CTC.

It is still unclear what repayment requirements may be enforced, but a limited safe harbor may be available to low-income taxpayers. Without that, the Advance Payments should be considered an advance of the Child Tax Credit – which typically reduces taxpayers’ taxes owed. This could result in repaying an advance if children’s eligibility changes or owing more taxes due to CTC being received in advance instead of reducing taxes.

The IRS says it will provide more information about advance payments soon.

PPP, Projections, and IRS Catches Terrorists - This is October's Reasonable Deductions

Posted by Sean M. Godwin Posted on Oct 09 2020

Reasonable Deductions

This summer has involved small business loan that could be forgiven for "free", $1,200 checks, and evolving campaign promises which has made our expertise relevant beyond our all-important April 15th. So, we want to weigh in on some of the recent current events and add some expertise to popular news. 



In the Highlight Reel:
The Reckoning of the Paycheck Protection Program

We've been following everything the SBA has released to ensure we stay informed about the PPP. The moral, it keeps changing. Still, many of those changes have been for the better. 

PPP Forgiveness starts in October for those who are already applying. But, with so many changes, many banks still have not opened their forgiveness process. 

Simplified Applications were just released yesterday by the SBA for those with loans under $50,000. How this will be implemented is yet to be seen. But, we are still confident that forgiveness should be much smoother for those who qualify.
10 Months of Payment Deferral 
is the new rule since the Flexibility Act passed in June. That means that your first payment won't be due until 10 months after it's dated, even if your loan agreement says otherwise.

24 Weeks is the PPP covered period we recommend for most of our clients. If you received the PPP, you can elect to use 24 weeks of payroll, rent, and utility costs instead of 8. For some of our clients who applied early, that 24 weeks ends starting in October.

Individual Matters:
The October 15 Deadline

This is a public reminder that the deadline to file a tax return on extension is October 15th. If you haven't completed your filing process, make sure to call our office today.


Planning April 15th rather than Enduring it

We are pretty excited about October 16th. It means that all of the 2019 returns are done and, more importantly, we can get started on 2020! That may sound too eager, but did you know that you could lower your tax liability significantly by developing a plan before 2020 is over? This is especially true for our Small Businesses and these will be our highest priority after Oct 15. If you participated in the PPP, your tax situation changed a lot, or you want to take more control, consider calling our office to schedule one now. 


To Your Credit

This last story is just some light, fun weekend reading involving taxes. If IRS agents systematically tracking down terrorists and seizing their funds sounds too wild to be true, read on. In this case, the IRS put its financial expertise to make a very different kind of deduction.

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