There are a lot of questions about this year’s advance child tax credit for divorced, separated and unwed parents who share custody. The IRS has specific rules that are different from prior years, including which households qualify and how the payments are disbursed upfront in monthly installments. Since the rollout of payments began, the IRS has issued guidelines for families who might be concerned about eligibility or about owing the tax agency money in 2022.
The IRS determined who would start receiving the advance credit this year based on the dependents you claimed on your 2020 tax return (or 2019, whichever is the latest return on file). So if any of your household circumstances have changed since then, including a shift in primary custody or marital status, the tax agency is encouraging parents to unenroll from the advance monthly payments. The key to doing that is the Child Tax Credit Update Portal, which we’ll explain below.
If you decide to unenroll in order to relieve a potential tax headache next spring, you’ll still get your child tax credit money, though it won’t be in 2021 — you’ll have to wait until you file your tax return in 2022. We’ve summarized the key things parents with shared custody need. For more, here’s what to know about child tax credit problems like delays and what to do if you’re missing a payment. This story was updated with new information.
Can divorced, separated or unwed parents both get a payment for the same dependent?
With the first two stimulus checks during the pandemic, parents who weren’t married but shared joint custody of a child could each receive a payment for the same dependent if they had been alternating years claiming the child on their taxes. With the American Rescue Plan in March, Congress closed off that loophole for the third stimulus checks.
Can parents who share custody of a child take advantage of a similar loophole with the 2021 child tax credit? The short answer is no. Only one parent can get the credit for a shared dependent. If you’re the one who claimed the child on your latest 2020 tax return, then you’ll be the one receiving the advance payments this year. If you incorrectly collect payments for a child this year, you may have to repay part or all of the up to $3,600 credit next year
What should parents do if they alternate yearly custody of a dependent?
Even if parents have an arrangement to alternate custody of their dependent, the IRS won’t know who has primary custody until your 2021 tax return is filed next spring. Let’s say, for example, that you and a coparent switch between claiming a child in odd-numbered and even-numbered years. If you start receiving the advance child tax credit payments this year even though you won’t actually be claiming the child on your 2021 return, then you are technically not entitled to that money.
If this kind of arrangement applies to you, or if you haven’t yet determined which parent will be claiming the dependent for 2021, the best option is to unenroll from the monthly payment program. ReadMore
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