When the federal government began sending out monthly payments for the advanced Child Tax Credit in the last six months of 2021, divorced and shared-custody parents were confused about who should get the stimulus checks.
The third stimulus payment, which gave parents $1,400 for each of their qualified dependents, caused the same consternation. Now that tax returns are due, parents should double-check that the benefits are claimed by the proper parent.
Child Tax Credit payments may be sent to the wrong parents
When parents share custody, it’s typical for them to take turns listing their children as dependents on their tax returns. One year on, one year off. The third stimulus payment and the monthly Child Tax Credit payments were an advance on credits that would be claimed on your 2021 tax return, as per The Sun.
However, because the IRS calculated eligibility for the benefits based on 2020 tax returns — or 2019 returns if the 2020 returns had not yet been filed — it’s possible that the benefit was given to the wrong parent. So, if a parent claimed a child in 2020, and the IRS based the reimbursements on that tax return, that parent would very certainly have received the advance Child Tax Credit and stimulus payments, even if the other parent claimed the child in 2021.
Even if the other parent got advance Child Tax Credit payments, an eligible parent who did not get advance payments for a qualified child will be allowed to claim the entire amount of the Child Tax Credit for that child on a 2021 tax return, according to the IRS. Parents who got the benefits in error might use the IRS.gov Child Tax Credit Update Portal to opt out of receiving monthly payments.
The IRS warned that anyone who did not enroll and received monthly payments for a child they would not declare on their 2021 tax return may have to reimburse those payments when they file. If they qualify for repayment protection, they may be exempt from paying any or all of the extra amount, as per NJ.com.
To select which parent would get the third stimulus payment, the IRS followed the same procedure. You can claim the 2021 Recovery Rebate Credit whether or not the other parent got the payment if you should have received it since you are claiming your child on your 2021 tax return. However, if a taxpayer receives the payment but does not identify the kid as a dependent in 2021, they will not be required to repay the money, according to the IRS.