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IRS CHANGES GUIDANCE ON CHILD TAX CREDITS:

IRS CHANGES GUIDANCE ON CHILD TAX CREDITS:

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.
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.”

Following are some of the updated questions – the full listing of the changes can be found here.

Q A1. What are advance Child Tax Credit payments? (updated May 20, 2022)

A1. Advance Child Tax Credit payments are early payments from the IRS of 50 percent of the estimated amount of the Child Tax Credit that you may properly claim on your 2021 tax return. If the IRS processed your 2020 tax return or 2019 tax return before the end of June 2021, these monthly payments began in July and continued through December 2021, based on the information contained in that return. Note: Advance Child Tax Credit payment amounts were not based on the Credit for Other Dependents, which is not refundable. For more information about the Credit for Other Dependents, see IRS Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents.

QA2. What did I need to do to receive advance Child Tax Credit payments? (updated May 20, 2022)

A2. Generally, nothing. If you were eligible to receive advance Child Tax Credit payments based on your 2020 tax return or 2019 tax return (including information you entered into the Non-Filer tool for Economic Impact Payments on IRS.gov in 2020, or the Child Tax Credit Non-filer Sign-up Tool in 2021), you generally received those payments automatically without needing to take any additional action. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return. For more information regarding eligibility and how advance Child Tax Credit payments have been disbursed, see Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit and Topic E: Advance Payment Process of the Child Tax Credit.

Q A3. Did I need income to receive advance Child Tax Credit payments? (updated May 20, 2022)

A3. No. Even if you had $0 in income, you could have received advance Child Tax Credit payments if you were eligible. Disbursement of advance Child Tax Credit payments began in July and continued on a monthly basis through December 2021, generally based on the information contained in your 2019 or 2020 federal income tax return. If you are eligible for the Child Tax Credit, but did not receive advance Child Tax Credit payments, you can claim the full credit amount when you file your 2021 tax return.