10/5/2021
Parents who share custody of their children should be aware of how the advance child tax credit payments are distributed. It's important to remember that these are advance payments of a tax credit that people can expect to claim on their 2021 tax returns. Understanding how the payments work will help people decide if they should unenroll to avoid a possible tax bill when filing next year.
Here are some of the most common questions about shared custody and the advance child tax credit payments:
If two parents share custody, how will the IRS decide which one receives the advance child tax credit payments?
Who receives 2021 advance child tax credit payments is based on the information on your 2020 tax return, or your 2019 return if your 2020 tax return has not been processed. The parent who claimed the child tax credit on their 2020 return will receive the 2021 advance child tax credit payments.
If a parent is receiving 2021 advance child tax credit payments and they shouldn’t be, what should they do?
Parents who will not be eligible to claim the child tax credit when they file their 2021 tax return should go to the Child Tax Credit Update Portal. on the IRS website and unenroll to stop receiving monthly payments. Receiving monthly payments now could mean you have to return the payments when you file your tax return next year. If your custody situation changes and you are entitled to the child tax credit for 2021, you can claim the full amount when you file your tax return next year.
If parents alternate years claiming their child on their tax return, will the IRS send the 2021 advance child tax credit payments to the parent who claimed the child on their 2020 tax return even though they will not claim them on their 2021 tax return?
Yes. Because you claimed your child on your 2020 tax return, the IRS will automatically issue the advance payments to you. When you file your 2021 tax return, you may have to pay back the payments over the amount of the credit you're entitled to claim. Some people may be excused from repaying some or all of the excess amount if you qualify for repayment protection. If you won't be claiming the child tax credit on your 2021 return, you should unenroll from receiving monthly payments using the Child Tax Credit Update Portal.
If one parent is receiving the advance child tax credit payments even though the other parent will be claiming the child tax credit on their 2021 tax return, will the parent claiming the qualifying child still be able to claim the full credit amount?
Yes. People will be able to claim the full amount of the child tax credit on their 2021 tax return even if the other parent is receiving the advance child tax credit payments. The parent receiving the payments should unenroll, but their decision will not affect the other parent’s ability to claim the child tax credit.
The IRS website has more information and answers to frequently asked questions about custody situations and how they can affect advance payments of the child tax credit.