Child tax credits are typically claimed when taxpayers file their income tax returns.
However, as part of the American Rescue Plan package, millions of parents received monthly advances of their child tax credits from July through December of 2021. In addition, the total child tax credit amount and eligibility were expanded.
The IRS calculated the advance credit payments based on the taxpayer’s 2019 or 2020 return, whichever was the latest available.
When filing their 2021 returns, some taxpayers might see a smaller refund than they are used to, some may see larger refunds, and a small percentage may have to repay advance credits they received but weren’t entitled to.
Letter 6419
In January, the IRS began mailing parents Letter 6419. You’ll need this information when you file your 2021 tax return.
In Box 1 of Letter 6519, you’ll find the aggregate amount of Advance Child Tax Credit received in 2021, and in Box 2 the number of qualifying children taken into account in determining the advance Child Tax Credits.
Married taxpayers will receive a separate Letter 6419. Each letter will show one-half of the total payments made. Therefore, when filing a joint tax return, the couple should claim the total amount listed in both letters.
Taxpayers are who receive Advance Child Tax Credits are required to reconcile their advance child tax credits on Schedule 8812 to determine the amount of credits they have left to claim on the 2021 tax return.
What if the payments shown on Letter 6419 are more than what you actually received?
In rare cases, the Letter 6419 might be incorrect. The IRS states that “a small number of families who received advance monthly payments did not get their December payment because they moved or switched bank accounts. This would have caused the payment to be returned to the IRS. In this case, the amount listed on their “2021 Total Advance Child Tax Credit (AdvCTC) Payments” Letter 6419 would list an incorrect total payment. If you think you fall into this category, the CTC Update Portal and your IRS Online Account will have the correct amount.”
What if you received advance child tax credits for children that did not live with you in 2021?
This scenario could occur with divorced or separated parents who switch custody of children.
Since the IRS determined monthly advanced child tax credits based on the parent’s 2019 or 2020 return, if parents switched custody in 2021, it is possible that the non-custodial parent would have to pay back any advance child tax credits with their tax return while the custodial parent would receive the credits on their return.
However, there is repayment protection for the non-custodial parent based on their 2021 modified adjusted gross income (MAGI). A parent in this situation will not have to repay any Advance Child Tax Credit payments for non-qualifying children if their 2021 MAGI is under:
- $60,000 if filing as married filing jointly or as qualifying widow or widower
- $50,000 if filing as head of household
- $40,000 if filing as single or married filing separately
What if the number of dependents on Letter 6419 is less than you have in 2021?
Since the IRS determined advance CTC eligibility based on their 2019 or 2020 return, if the taxpayer had additional children since then, they will receive the full amount of child credits on their 2021 tax return.
Source: childtaxcredit.gov