IRS Adds New FAQ Guidance on Child Tax Credits — Here’s What You Need To Know

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The IRS updated its frequently asked questions concerning the child tax credit this week, adding six more questions to a fact sheet posted on the agency’s website.

The new FAQs are designed to help taxpayers who received advance payments of the CTC or who were eligible to receive the credit prepare their 2021 tax returns, Accounting Today reported. The American Rescue Plan Act expanded the CTC only for tax year 2021. Democrats were unable to pass an extension through Congress.

Many of the new questions pertain to the tax season that just wrapped up. In some cases they are applicable to those who filed for an extension, might need to file an amended return or worry that they might have filed inaccurate information.

Here’s a quick rundown of the new questions added on April 27:

  1. My spouse and I received advance child tax credit payments in 2021. My spouse is now deceased. How do I calculate the child tax credit on my 2021 tax return now that they are deceased?
  2. I filed my 2021 tax return electronically, but made a mistake reconciling my advance child tax credit payments. Will my return be rejected by the IRS?
  3. I received a notice saying the IRS changed my 2021 child tax credit amount. What do I need to do?
  4. I filed a 2021 tax return to claim my qualifying child. The IRS rejected my return because someone filed their 2021 return before me and claimed my qualifying child. I am eligible to claim my child for the child tax credit, so what should I do?
  5. Can a child be a qualifying child of more than one person? Can both people claim the child tax credit for the same qualifying child?
  6. What do I enter as my prior-year AGI when e-filing my 2021 return if I used the Child Tax Credit Non-filer Sign-Up Tool?
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For complete answers to the above questions, visit the IRS Fact Sheet at IRS.gov.

One important thing to know regarding Question No. 1 is that if your spouse died in 2021 and you didn’t remarry in 2021, or if your spouse died in 2022 before filing a return for 2021, you can still file a joint return with your spouse. In this case, you will need to compare the total amount of the advance CTC payments that you and your spouse received during 2021 with the amount of the CTC that you and your spouse can properly claim on your 2021 tax return.

The IRS recommends that taxpayers use Schedule 8812 (Form 1040) to determine their 2021 child tax credit; report the advance CTC payments they and their spouse received in 2021; and figure out any additional tax owed — but only if they received an amount of excess advance CTC payments during 2021 and don’t qualify for repayment protection equal to that amount. 

Regarding Question 2 about making a mistake while filing electronically: The IRS will not reject your tax return if you made an error in reconciling your 2021 advance CTC payment. In this case, you are advised not to file an amended tax return. Instead, the IRS will calculate the correct amount of the child tax credit, make the correction to your tax return and continue processing your return. If a correction is needed, the correction will increase the time it takes to process your return. The IRS will send you a notice explaining any change made.

If you got a notice saying that the IRS changed your 2021 CTC amount, you don’t have to do anything if you agree with the change. If you disagree with the change, you are advised to call the IRS at the toll-free number listed on the top right corner of your notice. You’ll need to have a copy of the Social Security card(s) and individual tax identification number(s) associated with the tax return available when you call.

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