What Happens If I Owe the IRS Money Because of the Child Tax Credit?

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If you received too much money from the IRS because of the child tax credit, you may have to repay some or all of it when you file your 2021 tax return. According to the IRS, when you file your 2021 tax return during the 2022 tax filing season, you’ll need to compare the total amount of the child tax credit payments you received in 2021 with the amount that you’re eligible to claim on your tax return. 

See: The Big Increase and More Changes to the Child Tax Credit in 2021
Find: Child Tax Credit — How To Claim the Full Amount On Your 2021 Taxes

If the amount of your child tax credit exceeds the amount of your advance child tax credit payments, you can claim the remaining amount on your 2021 tax return. If the total amount of your advance child tax credit payments exceed the child tax credit that you’re entitled to claim, you may need to repay some or all of this amount to the IRS.

According to the IRS, there are several possible reasons why you could owe money because of the child tax credit, including:

  • A qualifying child who resided with you changed homes during 2021 and stayed more than half of the 2021 tax year with a different individual
  • Your income increased in 2021
  • Your filing status changed for 2021
  • Your main home was outside of the U.S. for more than half of 2021
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The total amount of advance child tax credit payments that a family received during 2021 was based on an estimate by the IRS. This estimate was based on information from your 2019 or 2020 tax return, and any updated information provided through the Child Tax Credit Update Portal.

See: Child Tax Credit — Will Monthly Payments Continue Into 2022?
Find: More Young Americans Writing Wills Due to COVID Fears — How Much Does Estate Planning Cost?

The IRS says that some taxpayers may be eligible for repayment protection. Taxpayers won’t have to repay any of their advance child tax credit if their primary residence was in the U.S. for more than half of 2021 and their modified adjusted gross income is at or below:

  • $60,000 if married and filing a joint return or filing as a qualifying widow or widower
  • $50,000 if filing as head of household
  • $40,000 if filing as single or married and filing a separate return

See: Reconcile the Child Tax Credit on Your 2021 Tax Return — Here’s How
Find: Here’s How Much Economists Say Stay-at-Home Moms Should Get Paid

If you do qualify for repayment protection, your tax liability from excess advance child tax credit payments is reduced by the full repayment protection amount of $2,000 multiplied by:

  • The number of qualifying children that the IRS took into account in determining its initial estimate of your advance child tax credit payments, minus
  • The number of qualifying children who were properly taken into account
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Early in 2022, the IRS will be sending out Letter 6419, which provides the total amount of your advance child tax credit payments that you received in 2021. You may need to refer to this letter when filing your taxes. If you do owe a balance and cannot afford to make the payment, the IRS will work with you to set up a payment plan. 

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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