Or maybe one or more of the children you claimed for the Child Tax Credit in 2020 will not be claimed on your tax return for 2021. Maybe you have a divorce decree where each parent takes turns claiming the children every other year.
The monthly payment, in some cases, might be higher than you'd be qualified to get.
"It's possible they may have to pay back some of the money, which would either be taken out of their tax refund or added to their tax liability," Pickering said.
There are "safe harbor" amounts where you're not required to repay up to $2,000 per qualifying child.
That's the case if you are single and your income is below $40,000. For the head of household, the income needs to be below $50,000. And for married couples filing jointly, the income would need to be below $60,000.
A partial safe harbor exists for filers with income between: $40,000 and $80,000 if single; $50,000 and $100,000 for head of household; and $60,000 and $120,000 for married filing a joint return.
If your income exceeds these thresholds, Pickering noted, you will be responsible for repaying the full amount of any overpayment on your tax return.
The IRS is expected to launch a portal that would give taxpayers a way to "opt out" of the monthly advance payments for the Child Tax Credit.
If you'd choose to opt out of the advance payments, you'd instead receive the money when you claim the credit when filing a 2021 return next year, again if you qualify.
In the future, the plan calls for enabling individuals and families to visit IRS.gov and use the "Child Tax Credit Update Portal" to notify the IRS of changes in income, filing status, or number of qualifying children.
Families would be able to update their direct deposit information and make other changes to ensure they are receiving the right amount of money.
These portals, though, are not yet available. See the special Advance Child Tax Credit 2021 page at IRS.gov/childtaxcredit2021 for updates.
"If your family or income situation has changed in the past year, you'll want to make updates in the IRS portal when it is released later this summer," Pickering said.
Did you owe way more than expected this year?
Some taxpayers need to make estimated tax payments to avoid a surprise bill on the 2021 tax return. Others can make the necessary adjustments by changing their withholdings.
Luscombe noted that an estimated tax penalty could apply if you owe more than $1,000 on your 2021 tax return than you have paid in withholding or estimated taxes.
But he said a penalty will not apply if your withholding and estimated tax payments equal at least 100% of the tax shown on your 2020 tax return (or 110% if your adjusted gross income is in excess of $150,000 or $75,000 if married filing separately).
"One advantage of increasing withholding over increasing estimated tax payments is that withholding is assumed to have been paid equally through the year while the IRS could still assert a penalty if estimated tax payments were not made in four equal installments through the year, and we are already past the first installment date, due April 15, 2021," Luscombe said.
The next estimated tax payment is due June 15.
The IRS has a special online tool called the IRS Tax Withholding Estimator that can help employees, retirees and self-employed individuals figure out if they need to make changes to their withholdings.
It's a step-by-step process and offers recommendations for how to aim for a desired refund next year.
Taxpayers who need to make a change must check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate.
The IRS notes that individuals could want to increase withholding if they hold more than one job at a time or have income from sources not subject to withholding.
Or you might want to decrease your withholding if you want a smaller refund next year.
You might need to review your withholding if you plan to get married in 2021. Or maybe you have a higher income and a more complex tax return.
Or you had an extra-large tax bill this year.
If you make adjustments on your W-4, take extra care to double-check how much money is being withheld from your paycheck to make sure the changes work for you.©2021 Detroit Free Press. Distributed by Tribune Content Agency, LLC.