The Internal Revenue Service has reviewed and updated the answers it previously provided to frequently asked questions about the 2021 child tax credit and advance child tax credit.
On Friday, the IRS released a revised information sheet containing a number of revisions.
The FAQ revisions relate to several areas:
- Subject A: General Information: Updated questions 1, 2, 3, 4, 5, 8, 9, 10, 11, 13, 14, 15, 16;
- Topic E: Child Tax Credit Prepayment Process: Update to Questions 2, 3;
- Section F: Updating your child tax credit information in 2021: Deletion of questions 1, 2 and updates 3, 4;
- Guide G: Receiving child tax credit advance payments: Update to questions 1, 6, 7, 9, 10, 11;
- Item H: Reconciliation of your child tax credit advance payments on your 2021 tax return: questions 1, 2, 9 updated and deletion of question 10;
- Section J: Opt-out of advance payments: question 1 updated and questions 2, 3, 4, 5, 6, 7 deleted;
- Section K: Verifying your identity to view your payments, Child Tax Credit 2021: updated 2, 3, 5, 6 and deleted 7; and
- Subject L: Frequently Asked Questions About Shared Custody: Updates 1 and 2.
The Child Advance Tax Credit was included in the Biden administration’s latest U.S. bailout package, which called for monthly payments in the second half of an extended version of the Child Tax Credit. The advance credits provided advance payments from the IRS of 50% of the estimated child tax credit amount that taxpayers could claim on their 2021 tax return. If the IRS processed the 2020 tax return or parent’s 2019 tax return before the end of June 2021, monthly payments began in July and continued through December 2021, based on the information in this earlier return. The IRS noted in its revised fact sheet that child tax credit prepayment amounts were not based on the other dependent credit, which is non-refundable.
One of the sections of the revised fact sheet deals with parents in joint custody and what happens if one of them receives the installments to which they may not have been entitled.
The IRS noted that it determined who received the 2021 child tax credit advance payments based on information on their 2020 tax return, or their 2019 return if the IRS doesn’t. had not processed their 2020 return. If they had claimed the child tax credit for their child on their 2020 return, then they would have received the child tax credit advance payments. If the child’s other parent claimed the child tax credit on their 2020 tax return, then they would have received the child tax credit advance payments.
“If you knew you would not be eligible to claim the child tax credit on your 2021 return (the one due April 2022), then you should have opted out of monthly payments,” the IRS said. “Receiving monthly payments in 2021 could mean that you will have to repay those payments when you file your 2021 tax return. If things change again and you qualify for the child tax credit for 2021, you can claim the amount total on your 2021 tax return when you file it.
In some cases, the parents may have agreed that for federal income tax purposes, one will claim the child for every even year while the other parent will claim the child for every odd year. One of the FAQs is for a parent who claimed the child tax credit for the child on their 2020 tax return, but the IRS also remitted the child tax credit advance payments. of 2021 even if he did not intend to claim the child tax credit. on their 2021 tax return.
“Because you claimed your child on your 2020 tax return, the IRS automatically issued child tax credit advance payments to you, even though you knew you would not be claiming your child on your tax return. of 2021,” the IRS said. “When you file your 2021 tax return (the one due in April 2022), you may have to repay installments that exceed the amount of child tax credit you are entitled to claim on that return.”
However, a parent may be exempt from repaying some or all of the excess amount if they qualify for repayment protection. The information sheet provides additional information about eligibility for refund protection when reconcile child tax credit advance payments on a tax return.