Disclaimer: This is general tax advice so don’t sue me. On July 15th, I noticed another deposit in my checking account from the IRS. Unlike the the three previous stimulus/relief payments, this was an advance on my child tax credit…which I had already adjusted my withholdings for. This was $750/month for the next six months that I’d have to pay back into the IRS. I didn’t like it when the Bush administration did the same thing in 2008 and here’s why:
- It doesn’t encourage personal responsibility: How hard would it be to educate people on the tax change and then encourage them to adjust their withholdings. The IRS didn’t even try to do this as the Form W-4 still includes the old tax credit amounts.
- It’s kind of a bait and switch: With the stimulus payments, that was new money to you more or less. With these advance tax credit payments, they are just giving you your tax refund early. It may feel like a stimulus payment, but it’s funded by your own withholdings.
- It feels political: Not nearly as bad as when GW Bush did it in an election year but still. If they just encouraged you to adjust your withholdings, you would get a bigger paycheck. Instead of you getting a bigger paycheck, you’re getting a check from the government. That feels suspicious.
Useful Links
- Wespath’s Summary of American Rescue Plan: https://www.wespath.org/assets/1/7/5693.pdf
- Manage Child Tax Credit Payments: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021
- Form W-4 to adjust withholdings: https://www.irs.gov/pub/irs-pdf/fw4.pdf
- Clergy Tax Estimator: https://www.dakotasumc.org/media/files/CONFERENCE/5_Conf_Finance_Benefits/Finance/Clergy_Tax_Estimator.xlsx