Child Tax Expiration

The child tax credit was expanded and modified for 2021 so that many clients have been receiving monthly advance payments of their 2021 credit via direct deposit. Typically, clients would wait until they file their income tax returns in April 2022 to claim the credit based on 2021 information. For 2021, the IRS used the taxpayer’s 2020 information (or, if not available, 2019 information) to determine whether the client qualified to receive advance payments. Taxpayers with modified adjusted gross income under $75,000 (single filers) or $150,000 (joint filers) were eligible for the entire credit. For taxpayers with income that exceeds this level, but is less than $200,000 (single) or $400,000 (joint returns), the credit phased out by $50 for each $1,000 above the initial threshold (but not below $2,000 per child). Clients could update their income and family information for changes via a new child tax credit portal feature. All clients will be required to reconcile their advance payments on their 2021 income tax return.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about allowing the advance payments of the child tax credit to expire.

Below is a summary of the debate that ensued between the two professors

Their Votes:







Byrnes











Bloink





Their Reasons:

Byrnes: The system of providing advance monthly payments of the child tax credit was never meant to be permanent. Advance payment of 2021 credits was a pandemic-related solution to a specific problem: parents who were unable to make ends meet because they were unable to work due to COVID-19 restrictions. Now, we're facing a labor shortage where many are simply choosing to rely on these and other government payments to stay home. There’s no real reason to treat the child tax credit differently than any other tax benefit, which is claimed on the individual’s Form 1040 in April.

Bloink: Advance payment of the child tax credit may have been a pandemic-related solution in the beginning. However, we've managed to pull many families out of poverty and allow parents to put food on the table by providing advance monthly payments. These families shouldn’t have to struggle and wait for benefits that are rightfully theirs under current law.

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Byrnes: Under the current advance payment system, many people are receiving advance child tax credit payments who don't really deserve them, because the IRS has based the 2021 advance payment eligibility on income from 2020 (or even 2019 in some circumstances). These taxpayers will soon be required to repay amounts they weren't entitled to receive--creating an even bigger headache for parents in the long run.

Bloink: There's no real reason to make parents wait to receive their benefits in a lump sum in the following year. In fact, that might encourage these parents to spend the funds on something other than caring for their children, as it's simply lumped in with their tax refund. Separating these payments from that lump sum "earmarks" the funds for childcare and alerts more parents to the true reason for the child tax credit.

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Byrnes: The entire advance payment system has been an administrative headache from the start. The headache is only going to get worse when we have to start recouping improperly paid advance payments. We should be focused on simplifying the tax system and the advance payments only made it more complex.

Bloink: We aren’t out of the woods when it comes to pandemic-related economic problems. In fact, we’re entering another phase filled with uncertainty. Now isn’t the time to ease up and allow families to slip into poverty. The advance payment system has worked, is working and should be allowed to continue.