I was getting a federal refund of a bit over $2k. Then I entered the advanced child tax credits we received, now that refund is gone. Why? Thought those were not taxable.

[AiC73]

Would this be it's calculated I should not actually have received those credits based on income I have? Any other reason? Or is this a mistake/issue with the tool?

[xmasbaby0]

Federal>Deductions and Credits>You and Your Family>Child Tax Credit

The IRS is sending out letter 6419 to you.  It will show the amount of advance child tax credit that you received during 2021.  Enter the information from that letter carefully.   The remaining amount of CTC that you can receive will show up on line 28 of your 2021 Form 1040.

PREVIEW 1040

https://ttlc.intuit.com/questions/1901539-how-do-i-preview-my-turbotax-online-return-before-filing

Click on Tax Tools on the left side of the screen. Click on Tools. Click on View Tax Summary. Click on Preview my 1040 on the left side of the screen.

NOTE:   The CTC is indeed a “credit” that can be applied toward any tax liability that you would otherwise have to pay as “tax due”  to the IRS.

And…..Ignore that “refund monitor.”  The software STARTS OFF by giving you the full amount of CTC.   When you enter the amounts from your letter, the software reconciles the amount you received with the amount you can still get IF you are eligible to get the other half.     You are NOT losing any of the credit; you are not being taxed on the credit.  Don’t get confused by the reconciled amount.   You got some of it already—-now you get the rest.

 If you received the advance payment and are NOT eligible to get the other half, then it will not show up on line 28.  (Such as in some cases where the wrong parent got the advance payments, etc.)

That “refund monitor” should not be taken seriously until every last morsel of your data has been entered.

[Critter-3]

First let me point out that the Refund-O-Meter is only correct once all your income and expenses have been entered and the program is fully operational. With each entry of income or expenses the meter will continue to vary as the program recalculates the return with each step you take.  If this annoys you then turn off the meter until the end.   

Next ... the program interview flow is  poorly designed  and it  will give you a false refund total early in the interview.   The program gives you 100% of the CTC and the third stimulus credit once you have completed the MY INFO tab early in the interview  and  then much   later in the deductions & Credits tab  you are asked how much of these credits you got in advance and then the credits are adjusted for the advance payments which will show as a reduced refund amount or an increase in the balance due.  

Same thing for the EIC … the program gives you the credit in the refund posted BEFORE  you get to the EIC portion of the interview.  At that point it asks you a couple of questions that could possibly REMOVE the credit already reflected in the refund posted  which is also a point of confusion for many. 

One day the programmers may  get this changed to more timely reflect the section you are working on as you work on it and not way in advance.  Users are not happy when they see the refund being reduced without a good explanation especially when the program says you can get $X as a credit and they see the refund either being reduced or not increased.

[xmasbaby0]

And....depending on your income......if your income is above the limit the CTC is phased out

Q C2. Can my Child Tax Credit amount be reduced based on the amount of my 2021 income? (added June 1...

A2. Yes. The Child Tax Credit phases out in two different steps based on your modified adjusted gross income (AGI) in 2021.

The first phaseout can reduce the Child Tax Credit to $2,000 per child.

• That is, the first phaseout step can reduce only the $1,600 increase for qualifying children ages 5 and under, and the $1,000 increase for qualifying children ages 6 through 17, at the end of 2021.

The second phaseout can reduce the remaining Child Tax Credit below $2,000 per child.

For additional information on the amounts of modified AGI that reduce the 2021 Child Tax Credit, see Q C4 and Q C5, below.

[Critter-3 · Accepted solution]

Ok ... let me see if I can shed some light on this situation that many folks will find themselves in this year ... that advance was probably not the best thing to happen.  Here is an example for just one child ... 

Last year the credit was $2000 of which only $1400 could be refunded after taxes were paid down.

This year the credit is $3000 (or $3600) of which you got 1/2 up front  leaving just $1500 (or $1800) for the credit on the return to pay down your tax bill.

So last year the credit on the return was $2000 and this year it is only $1500(or $1800) ... you are short $500 (or $200) on the return.   You are thinking the credit went up so my refund should be more but remember you got some in advance.  Review the 2020 & 2021 returns side by side to see this in action.  

You need to look at the entries from line 24 to 31 on your tax return form 1040. Then compare them to the same lines on last year's tax return. On these lines you will see your Total Tax (line 24) and the deductions from that tax (lines 25 to 32.) That is where you will find the difference between this year and last year, and that may explain why you owe taxes this year or have a lessor refund than expected. 

If the advance child tax credit payments that you received are more than the amount you are entitled to based on your 2021 tax return, you have to pay back part or all of the advance payments, unless you qualify for repayment protection. That can happen if you got advance payments for a child who you are not claiming as a dependent for 2021, or if your income is higher in 2021, or in certain other situations. See the questions and answers at the following link on the IRS web site.

Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return

[AiC73]

Thanks for the response and I appreciate it. I haven't got to the bit yet about whether I will get the 2nd half in 2022. I doubt it based on current view. What seems disappointing currently - unless the ''live results'' is completely wrong of course - is that I looked to be in for a $2.5k or so refund - then entered the credits I received last year - and all of a sudden that refund went to basically zero. I have nearly finished the federal and hit ''review'' - and it stayed at near zero. My income went up a bit in '21 from '20 - and so all I can think of (unless again there is a mistake/issue) - is that I was not really eligible for the payments in '21 and the payments I got therefore offset any refund I was going to get in this tax cycle.

[AiC73]

Thanks - yes, i am now thinking - my income in '21 did increase due a bigger bonus - so wonder if this made me mostly not eligible and my refund drastically reduced/near zeroed due to payments I got early...basically seems I might have been paid my refund in late '21 and now pretty much near zero. At least I don't owe so far!

[Critter-3]

When you have completely finished entering in everything then review the 2020 return side by side against the 2021 return to see what changed ... increased income and reduced credits may be it.