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month for each child age 6 to 17, which for the six at tinyurl.com/9z687zpx) on selected provisions of
months the payments were made should in most the Build Back Better Act, including an extension
cases equal half of the eligible credit for the year. of the advance CTC to the 2022 tax year, there’s
Thus, a requirement to repay excess advance credits reason for concern that the advance CTC could
should be uncommon. cause many of these clients to be underwithheld
Still, because in most cases the IRS based the this year, when, under the bill, it would be paid for
advance CTC payments on taxpayers’ 2020 (or the full year. This could occur if, for example, the
2019) return information, if the client’s gross client receives the advance payments, but based
income increased dramatically in 2021 (e.g., from a on the client’s Form W-4, Employee’s Withhold-
return to full-time work after a bout of unemploy- ing Certificate, indicating the number of children
ment) into or beyond the phaseout range, or there qualifying for the credit, the client’s employer does
was a decrease in the number of qualifying children not take the advance payments into account in de-
(e.g., a child turned 18), and the taxpayer did not termining wage withholding amounts. Even with
update his or her information with the IRS, the tax- the half-year CTC advance payments in 2021,
payer could owe a repayment. A safe harbor under CPAs could see many more clients with families
Sec. 24(j)(2)(B) may limit the payback amount, whose federal income taxes were underwithheld
depending on modified adjusted gross income for this reason alone.
(MAGI). This safe harbor phases out for taxpay- More to the point of preparers’ workflow, every
ers filing jointly with MAGI exceeding $60,000 return with a CTC will require reconciling the total
($50,000 for head-of-household filers and $40,000 advance CTC amount with the full-year credit,
for all others) and is totally phased out for taxpay- which necessitates verification of the former. The
ers filing jointly with MAGI exceeding $120,000 IRS has said that it will send Letter 6419 in Janu-
($100,000 for heads of household and $80,000 for ary 2022 to taxpayers, reporting their advance CTC
all others). payments disbursed in 2021.
Also, as the AICPA has pointed out in a On many of these same returns, preparers will
comment letter to congressional leaders (available likely also encounter clients’ eligibility for ARPA’s
enhanced child and dependent care credit. Maxi-
mum qualifying expenses for the credit increased
AICPA RESOURCES for 2021 to $8,000 for one qualifying individual and
to $16,000 for two or more qualifying individuals,
Articles from, respectively, $3,000 and $6,000 previously,
“Get Your Clients Ready for Tax Season” (sponsored report), JofA, Oct. 2021, and the credit went from being nonrefundable to
tinyurl.com/dhy7nwka fully refundable, with higher credit amounts and
“Guidance Issued on 2021 Qualified Sick and Family Leave Wage Reporting,” phaseout ranges. CPAs thus will want to make sure
JofA, Sept. 8, 2021, tinyurl.com/32fpebkm working families can document their qualifying
expenses with respect to not only amounts paid
Webpages
but also required identifying information for the
Annual Tax Compliance Kit, tinyurl.com/yzc7t8kc service provider or providers and for the qualifying
Tax Season, tinyurl.com/yhkezser individual or individuals (Secs. 21(e)(9) and (10)).
Some clients who might not have bothered to

IN BRIEF expense ceilings and credit amounts the employee retention credit — these
and is fully refundable. Other items also have implications for businesses’
■ Novel features on individual returns include an economic impact payment/ income tax returns.
for 2021 include an increased child recovery rebate credit and, for certain ■ CPAs may also take the occasion to
tax credit, which must be reconciled taxpayers, an enhanced premium tax review business relief provisions on
with advance payments of the credit credit and earned income tax credit. prior-year returns and look ahead
amount made during the second half ■ While most pandemic-related business — with wealthy clients particularly
of the calendar year. tax relief for 2021 is reflected in — to plan for the impact of new tax
■ Similarly, the child and dependent care employment taxes — mainly, the credit legislation.
credit for 2021 is increased in qualifying for qualified sick and family leave and

8 | Journal of Accountancy January 2022