MFJ w/3 children e-filed in March FINALLY processed 7/13/21! Refund received with interest. It involved new child born in 2020 and unpaid stimulus applied for. So all is now good for 2020. Unfortunately, since it did not process by 6/28/21, they are sending advance CTC for only 2 children based on 2019 return. Will this correct itself, or will client just have to wait to file next year for 3rd child?
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I attended an IRS web cast today, and was told they will use 2020 return or 2019 if 2020 not on file. You will reconcile on the 2021 tax return -
Have them use the new portal to add a child. Can add for August and forward by 2 August, I think.Comment
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Thanks. Not available yet on portal, scheduled for "late summer" per IRS Topic. Will update for this as soon as it is available. Maybe by Sept.Comment
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Burke is right. I've had clients opt out, but none add a child. Late summer... Or, if you're really lucky, the deadline for August payments is something like 2 August, so maybe because your client's return processed 7/13/21 their August payment will include their new child. Maybe. Wait and see. 2021's tax theme is Patience.Last edited by Lion; 07-22-2021, 10:27 AM.Comment
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You were right. August payment did include new child's portion, and we have not been back on the website to add child. Not sure IRS will make up the missed payment in July. We had already decided to let things lie as they were so that it would be available when filing next year. I know they can opt out, but since CTC is fully refundable for 2021, they should not owe anything and this money is being kept in savings -- not spent. I figure it is just as well, since their return -- due to CTC, CCC, and EIC with sche C is ALWAYS held up in processing, 2 months in 2020, and 4 months in 2021. . At least they will have the advance monies on hand if needed.Last edited by Burke; 08-31-2021, 11:29 AM.Comment
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Any ideas how this situation will be handled?:
Married couple A will have two individuals eligible for 2021 CTC. On their 2020 tax return, there was only one.
Married couple B will have NO individual eligible for 2021 CTC. On their 2020 tax return, there was one. That individual is now an eligible individual for Couple A but no longer for Couple B. (Custodial parent issue has changed, and is likely permanent.)
Married couple A is receiving the advance payments for one child. It is assumed, but not known, that married couple B may also be receiving advance payments for one child. Both sets of payments are being based on their respective 2020 tax returns.
Thanks.
FEComment
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Just like the stimulus payments were advance credits. The child tax credits are advance credits for 2021. If you receive advance credits based on 2020, or 2019, and you don't qualify in 2021, you have to pay back the advance payments.Comment
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While all the concern is what are you getting? Will TP remember in March or do you think IRS will send out some kind of statement?Comment
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Unlike the stimulus payment, which did not have to be paid back, as of now if you receive advance CTC, and don't qualify you will be required to pay it back.Comment
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Terryats is spot on.
Section 9611 of the American Rescue Act contains:
“(2) EXCESS ADVANCE PAYMENTS.—
“(A) IN GENERAL.—If the aggregate amount of payments under section 7527A to the taxpayer during the taxable year exceeds the amount of the credit allowed under this section to such taxpayer for such taxable year (determined without regard to paragraph (1)), the tax imposed by this chapter for such taxable year shall be increased by the amount of such excess. Any failure to so increase the tax shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).Comment
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However, there *IS* a "Safe Harbor for the repayments. If your income is below certain thresholds, the repayment is reduced or eliminated.
For the easy-to-read version, see the FAQs on this IRS page (Q/A #H8 is the probably the most comprehensive one to read).
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