Child tax credit checks: Parents who share custody need to know this

Child tax credit checks: Parents who share custody need to know this

Will both parents get a child tax credit check for the same kid from the IRS? We’ll tell you about payment rules and requirements.

If you have a child that qualifies you for the child tax credit, you can expect your first payment to arrive on July 15. From then, the checks will arrive monthly throughout 2021 — that is, unless you opt out of the partial monthly checks through the IRS portals next month. But how does it work for parents who share joint custody of a kid? Will the IRS send both parents a payment?

Parents who share custody of a child have some rules — including who’s eligible for a payment. For example, as a parent, you could receive a total of up to $3,600 for each kid under age 18, and babies born during this year are eligible. Also, parents who pay little to no federal tax will get the full amount they qualify for, whereas in the past, lower-income families were excluded.

There are also requirements your dependents must meet and limits on the money you get based on your adjusted gross income. As a parent, you should also know that you could get money back for child care expenses — up to $16,000. Plus, if you haven’t yet received your recent stimulus payment, you might want to know when to expect it, how to track it and what to know about the amended tax form.

1. In a shared-custody situation, can both parents get the monthly payment?

With the first two stimulus checks, parents who weren’t married but shared joint custody of a child could each receive a payment for the same child if they had been alternating years claiming the child on their taxes. With the most recent stimulus package, 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 new temporary tax credit? No, said Elaine Maag, a principal research associate with the nonpartisan Tax Policy Center. Only one parent can claim the credit for a given child, Maag told us. And if you incorrectly claim a child this year, you may have to repay all or part of the payment next year.

Repaying any child tax credit overpayment is a departure from how the stimulus checks were handled. Typically, if you received an overpayment, you don’t need to send it back. (Here are situations where you’d need to return a stimulus check payment to the IRS.)

2. Will the child tax credit money be used to pay overdue child support?

According to the Congressional Research Service — Congress’ public policy research institute — the new law exempts the periodic child tax credit payments going out this year from offset for past-due child support. However, the amount you claim as a credit on your 2021 tax returns in 2022 could be subject to offset, CRS said, similar to how stimulus payments claimed as a recovery rebate credit could be redirected to cover an overdue debt.

3. How will the new child tax credit work?

Before the changes this year with the American Rescue Plan, eligible families could claim a tax credit for their qualified children when they filed their taxes. The credit would reduce the amount of taxes they owed. That payment rule, however, excluded lower-income families who didn’t owe federal taxes and wouldn’t benefit from a tax saving with the credit.

With the new law, the credit is “fully refundable,” so qualifying families will receive the full dollar amount even if they don’t owe income taxes. Families will receive half the credit this year through period payments starting in July and the second half of the credit in 2022 when they file their 2021 taxes during next year’s tax season. If instead, you’d rather get one check, the IRS will let you choose to receive the full payment next year when you file. Here are more details on how the child tax credit payments will work.   ReadMore



Source : cnet