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@Just-Lisa-Now- wrote:

My daughter is a single mom with 2 kids, she could really use the monthly payments. 

The increased child care credit (she pays close to 15k a year) should reduce her liability enough to make up for the CTC she wont be getting on her tax return.   @TaxGuyBill this will still be non refundable though, right?

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The Child and Dependent Care Credit IS refundable for 2021.  See Sec. 9631 of ARPA21.

Also, for the CTC only half of the increased credit is advanced.  So $1,500 of $3K and/or $1,800 of $3,600.  The remaining $1,500-$1,800 will still be claimed as a credit (subject to phase-out based on MAGI).  So there won't be too much of a "loss" of the credit at tax time because it's substantially offset by the increased credit amount.  If she's used to getting $4,000 for 2 kids, she'll still be getting $3,000-$3,600 (in addition to the advances).  Also the wonky calculation to determine the refundable portion has been eliminated for 2021.

The only cases where I see this being useful are for taxpayers with $0 income tax.  Otherwise they can just adjust their withholding in Step 3 of the "new and improved" W-4 and already get this "advance" via reduced paycheck withholding.  The problem I see is that the higher income folks (who will be phased back to the old $2K numbers) may already be doing this (I know I have several clients who are) and without action on their part, they get both reduced withholding and monthly IRS payments for the same credit.  That's going to leave them with a balance due (and likely underpayment penalties) next April.

I'm still trying to figure out the limitation on reduction of increased credit and how the phase out of the safe harbor amount impacts the reconciliation of excess advance credit.  Somebody really went through the whole checklist of buzz words when they wrote this one.  But I have a 10-hour train ride later this month so I'm hoping that's enough time to make sense of this mess. 🙂  If anyone has any good detailed articles please let me know.  So far I've found some higher level "increase in CTC" overviews but nothing that digs deep into how all of the thresholds work.  The safe harbor phase out starts at a $40K/$50K/$60K threshold and the increased credit phase out uses a $75K/$112.5K/$150K threshold and then we hit the regular $200K/$200K/$400K phase out.

If we're not having fun yet, we soon will be!

Rick