Why does my tax liability (amount owed) go from $500 to $3500 after entering the $3000 Advanced Child Tax Credit Payments I received in 2021? Our joint AGI is under 150k.

[kingm60]

This is essentially me repaying every cent of the Advanced Child Tax Credit payments.

[RBBrittain]

That is normal for advance payments of tax credits; you claim the full credit on your return, but then must deduct the advance from the full credit. The old advance EITC worked the same way.

In your case, TurboTax apparently computed the $500 as including a full CTC without receiving the advance payment; once you entered your advance CTC that reduced your credit dollar-for-dollar.

[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 credits 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.

[Critter-3]

The Child Tax Credit reported on line 28 of the Federal 1040 tax return is computed in two steps: 

• First, you are given full credit for the Child Tax Credit based upon your 2021 income and the dependent information entered into your tax return, then
• Second, the benefit of the credit is reduced by the amount of any advance payments reported under Federal / Deductions & Credits / Your tax breaks / Advance payments, Child and Other Dependent Tax Credits at the screen Tell us about any Advance Child Tax Credit payments.

You are able to view the Child Tax Credit on line 28 of the Federal 1040 under Tax Tools / Tools / View Tax Summary / Preview my 1040 after each step.

Enter the information to generate the Child Tax Credit, then review line 28 of the Federal 1040 to see whether you have been given credit for the proper amount.

Then report the Advance Child Tax Credit payments received and reported on your IRS Letter 6419.

Review line 28 of the Federal 1040 to see whether you have been given credit for the proper amount.

[kingm60]

Thank you for your response. I will turn off the "Refund-o-Meter" as it definitely gives me a false sense of my refund amount before the calculations are complete.