What Parents Need To Know About The Child Tax Credit And Recovery Rebate Credit
There’s a lot that goes into the income tax returns parents with shared custody of children can expect to file this year. This article provides some information on the child credit and the 2021 recovery rebate credit to help parents with shared custody understand these credits before filing in February of 2021.
Payments for Economic Impact and the Recovery Rebate Credit
The third Economic Impact Payout was a payment in advance of the recovery rebate credit for 2021. The IRS determined eligibility and amounts based on filers' 2020 or 2019 tax returns. This means the following for those who share a qualifying dependent:
• If an eligible taxpayer did not get a third-round Economic Impact Payment for a qualifying dependent they will claim on their 2021 tax return, they can claim the 2021 recovery rebate credit regardless of whether the other parent received an Economic Impact Payment.
• If a taxpayer got a third-round Economic Impact Payment for a dependent they will not claim on their 2021 tax return, they are not obligated to repay all or part of the Economic Impact Payment if they should have received less based on the information presented on their 2021 tax returns.
Child Tax Credit
The IRS determined who got 2021 advance child tax credit payments using information from taxpayers' 2020 tax forms, or their 2019 return if the IRS had not processed the 2020 return. In other words, if a parent claimed the Child Tax Credit for an eligible child on their 2020 tax return, they would have received advance child tax credit payments in 2021.
Families who knew they would not report a child on their 2021 tax return had the opportunity to opt out of receiving monthly payments by visiting the IRS.gov Child Tax Credit Update Portal. People who did not unenroll and received monthly payments for a child who will not be claimed on their 2021 tax return may be required to repay those payments when they file. If they qualify for repayment protection, they may be spared from repaying any or all of the excess amount.
Even if the other parent got advance child tax credit payments, an eligible parent who did not get advance payments for a qualifying child will be able to claim the full amount of the child tax credit for that kid on a 2021 tax return.