2021 Fed Est Tax Payments and Child Credit Advance Payments

[EricEng]

In a normal tax year, multiple child tax credits + deductions counter out my fed tax liability perfectly (within $1000) at tax filing time. 

However, this year it appears they intend to give out (half?) in the form of "advance payments".  I had a very large short term gain this first quarter from Gamestop (power to the player!) that boosted my early year income a lot.  Normally the child tax (especially increased amount) credit plus standard withholdings and less capital gains elsewhere would still balance it come year end. So now I'm pondering if I need to make Fed Estimated Payments in case they do an advanced child credit payment later in the year (after the first quarter estimate time passes).  Anyone else pondering this?  I did read you might be able to opt out of the advanced payments as well.

Basically I'll end up owing taxes April 15, 2022 and looking at underpayment penalty from quarter 1 income.

[Sugaree]

In a normal tax year, multiple child tax credits + deductions counter out my fed tax liability perfectly (within $1000) at tax filing time. 

However, this year it appears they intend to give out (half?) in the form of "advance payments".  I had a very large short term gain this first quarter from Gamestop (power to the player!) that boosted my early year income a lot.  Normally the child tax (especially increased amount) credit plus standard withholdings and less capital gains elsewhere would still balance it come year end. So now I'm pondering if I need to make Fed Estimated Payments in case they do an advanced child credit payment later in the year (after the first quarter estimate time passes).  Anyone else pondering this?  I did read you might be able to opt out of the advanced payments as well.

Basically I'll end up owing taxes April 15, 2022 and looking at underpayment penalty from quarter 1 income.

I'm thinking about having a little extra withheld from my W2 paycheck starting in July (or whenever they start sending those out).  I've read that there may be a way to opt out of the advance payments, but who knows if that's going to end up happening.

[terran]

Unless you're going to owe a lot I'd just adjust you withholding at some point. Withholding payments are assumed to be made on time whenever you make them while estimated taxes need to be either made in the quarter the income is earned or in 4 equal installments.

See the safe harbors for avoiding a penalty under "Penalty for Underpayment of Estimated Tax" at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes -- I always just make sure I pay as much as my total tax liability last year as it's the most certain (no estimating of tax this year's liability required). This becomes 110% of last years total tax if your AGI is over $150k.

[EricEng]

See the safe harbors for avoiding a penalty under "Penalty for Underpayment of Estimated Tax" at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes -- I always just make sure I pay as much as my total tax liability last year as it's the most certain (no estimating of tax this year's liability required). This becomes 110% of last years total tax if your AGI is over $150k.

Issue is I usually had final taxes owed come out to just over $6k after all deductions to cancel out with my 3 child tax credits perfectly.  However, now if they pay out those child tax credits instead of waiting I'm not going to have withheld close to last year's tax owed amount without making estimated tax payments. 

It might be a moot point though with the increased child credits.  $3,600x3 kids=$10,800  divide by half payout=$5,400 advanced pay and $5,400 credit on tax return instead of my previously expected $6,000.  That's assuming they advance pay only half.  It's just has a potential to be a weird situation.