The Internal Revenue Service has revised and updated the answers it previously provided to frequently asked questions on the 2021 Child Tax Credit and Advance Child Tax Credit.
On Friday, the IRS posted a
The FAQ revisions come in several areas:
- Topic A: General Information: Updated questions 1,2,3,4,5,8,9,10,11,13,14,15,16;
- Topic E: Advance Payment Process of the Child Tax Credit: Updated questions 2,3;
- Topic F: Updating Your Child Tax Credit Information During 2021: Removed questions 1, 2 and updated 3, 4;
- Topic G: Receiving Advance Child Tax Credit Payments: Updated questions 1, 6, 7, 9, 10, 11;
- Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return: Updated questions 1, 2, 9 and removed 10;
- Topic J: Unenrolling from Advance Payments: Updated question 1 and removed 2, 3, 4, 5, 6, 7;
- Topic K: Verifying Your Identity to View your Payments, 2021 Child Tax Credit: Updated 2, 3, 5, 6 and removed 7; and,
- Topic L: Commonly Asked Shared-Custody Questions: Updated 1 and 2.
The Advance Child Tax Credit was included as part of the Biden administration’s American Rescue Plan, which provided monthly payments in the second half of the year on an expanded version of the Child Tax Credit. The advance credits provided early payments from the IRS of 50% of the estimated amount of the Child Tax Credit that taxpayers could claim on their 2021 tax return. If the IRS processed the parents’ 2020 tax return or 2019 tax return before the end of June 2021, the monthly payments started in July and continued through December 2021, based on the information contained in that earlier return. The IRS noted in its revised fact sheet that Advance Child Tax Credit payment amounts were not based on the Credit for Other Dependents, which is not refundable.
One of the sections in the revised fact sheet deals with parents with shared custody and what happens if one of them received the advance payments to which they may not have been entitled.
The IRS noted that it determined who received 2021 advance Child Tax Credit payments based on the information on their 2020 tax return, or their 2019 return if the IRS hadn’t processed their 2020 return. If they claimed the Child Tax Credit for their child on their 2020 return, then they would have received the advance Child Tax Credit payments. If the child's other parent claimed the Child Tax Credit on their 2020 tax return, then they would have received the advance Child Tax Credit payments.
“If you knew you would not be eligible to claim the Child Tax Credit on your 2021 return (the one due in April of 2022), then you should have unenrolled from receiving monthly payments,” said the IRS. “Receiving monthly payments during 2021 could mean that you have to repay those payments when you file your 2021 tax return. If things changed again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your 2021 tax return when you file it.”
In some cases, parents may have agreed that, for federal income tax purposes, one will claim the child for each even-numbered year while the other parent will claim the child for each odd-numbered year. One of the FAQ items concerns a parent who claimed the Child Tax Credit for the child on their 2020 tax return, but the IRS also disbursed the 2021 advance Child Tax Credit payments to them even though they weren’t planning to claim the Child Tax Credit on their 2021 tax return.
“Because you claimed your child on your 2020 tax return, the IRS automatically disbursed advance Child Tax Credit payments to you even though you knew you wouldn’t be claiming your child on your 2021 tax return,” said the IRS. “When you file your 2021 tax return (the one due in April of 2022), you could have to pay back the advance payments that exceed the amount of the Child Tax Credit you're entitled to claim on that return.”
However, a parent may be excused from repaying some or all of the excess amount if they qualify for repayment protection. The fact sheet provides further information about qualifying for repayment protection when
