Potential Issues with the 2021 Advance Child Credits

The advance child tax credit payments began on July 15th, 2021.  Qualified taxpayers who did not opt-out online, received the advance child tax credits on a monthly basis whether they wanted to receive the child tax credit payments upfront or not!

Therefore, it is not surprising that the advance child tax credit payments have created a level of complexity and confusion for taxpayers.  For example, divorced or separated taxpayers with joint custody who are alternating claiming their child each tax year.  The parent who claimed the child in the previous tax year will receive the advance child tax credit, but he or she will not be able to qualify for the tax credit on their 2021 tax return because they are not able to claim the child as a dependent.  As a result, he or she will have to repay the excess child tax credit that they received.  

However, there is a provision for repayment protection.  Under this provision, if a taxpayer’s income is below the threshold amount ($80,000 for a single taxpayer, $100,000 for a head of household, and $120,000 for a joint filer) he or she will be protected from repaying up to $2,000 in excess payments received.  Full repayment protection occurs only when your income is at half or less of the above thresholds. 

Taxpayers should receive a “Letter 6419” from the IRS that provides information on the total amount of advance child tax credit payments that were disbursed to you during 2021.   If the letter does not agree with your record of payments received you can review your payments in the “Child Tax Credit Update Portal” and call the IRS at 800-908-4184 to report any missing payments.  This will allow you to claim the missing “Child Tax Credit” on your 2021 return.