Child tax credit advance payments generally do not require a refund


• On July 15, the IRS began issuing the first child tax credit advance payments.

• These are advance payments of the “estimated amount of the child tax credit that you can correctly claim on your 2021 tax return during the 2022 tax filing season”.

• A family will have to repay the money received if their household qualifies for a 2021 child tax credit that is smaller than what the IRS has estimated. Divorced parents who claim their children as dependents could also find themselves in a situation where the IRS could send child tax credit payments that should be refunded.

• These exceptions should be rare and do not fit the general mandate that the tweet misleadingly asserts.

See the sources of this fact check

Many U.S. households with children saw their bank balances increase on July 15 as the IRS began distributing the first in a series of child tax credit advance payments.

Advance payments of the child tax credit – which was increased under the American Rescue Plan Act – continue to until December 2021 families with children aged 17 and under. In the end, the down payments will be distribute half of a family’s total expected child tax credit for 2021. Families will receive the other half of the credit when they file their income tax returns.

Although many view payments as a positive step, others have turned to social networks to express their concerns.

“I see a lot of people celebrating #BidenBucks like its free money,” one reads deleted since Tweeter. “This is a dollar-for-dollar advance on your taxes. You must return EVERY PENNY when you return next year. It’s different from the stimulus money you might have received in 2020 (didn’t need a refund).

We have found similar tweets elsewhere, including one who described the credit as “bait & switch“And another who described it as a”swindle. “

Will people have to repay the money they receive from advance payments?

It is possible, but mechanisms are in place to prevent this from happening, especially for the most vulnerable families. In many cases, taxpayers will not have to repay the money received through the advance payments of the child tax credit.

On its website, the IRS explains that the payments are “advance payments from the IRS of 50% of the estimated amount of the child tax credit that you can properly claim on your 2021 tax return during the 2022 tax reporting season.”

A family with a child aged 17 or under that has an adjusted gross income of less than $ 240,000 per year for a single filer or less than $ 440,000 per year for a couple filing jointly should be eligible receive at least part of the 2021 child tax credit.

To determine eligibility for advance payments and to estimate the child tax credit a family will earn, the IRS used the 2020 tax returns (or 2019 tax returns if a family’s 2020 return no. has not yet been processed.)

Since the child tax credit advance payments are based on an estimate of the 2021 tax credit a family will be entitled to, some families may have to repay part of the money.

“If the total (amount of Advance Payments of the Child Tax Credit) is greater than the amount of the Child Tax Credit that you are allowed to claim on your 2021 tax return, you may have to repay the amount. excess on your 2021 tax return during the 2022 tax filing season ”, the IRS explained.

If a child turns 18 in 2021, for example, the IRS could overestimate the expected child tax credit of a family. It should be noted that the IRS regularly obtains information from the Social Security Administration on valid Social Security numbers, which can be used to determine age. But if for some reason a family receives advances for a child who is no longer eligible in 2021, the money will be will probably have to be refunded.

Divorced parents who alternate the years when they claim their children because dependents could also be in a situation where the IRS could send child tax credit payments that should be refunded.

But protections are in place to prevent families from ending up in a situation where they have to pay back, according to Elaine Maag, tax policy expert and senior research associate at the Urban Institute-Brookings Institution Tax Policy Center.

She said research shows that very low-income families are the most likely to have changing childcare situations or to have experienced marriage or divorce. To protect these families from having to repay money, there is a “holdback” provision in the law.

“That basically says that if you are single and have an income of less than about $ 40,000, you have no risk of repaying erroneous payments,” Maag said.

Married couples earning up to $ 60,000 are also protected having to repay overpayments of up to $ 2,000 per child due to the disclaimer.

If a family’s income has increased significantly in 2021 compared to the income shown on the 2020 (or 2019) tax return that the IRS used to estimate the family tax credit, the outdated information could lead to issues. credit overpayments that may need to be repaid.

“That would reduce your refund or increase your tax payment next April,” April Walker, senior manager of tax practices and ethics at the American Institute of Certified Public Accountants, told CNBC. “This is how he would be reimbursed.”

Maag said she believes drastic increases in income resulting in tax credit overpayments “will be rare” because families will receive the maximum amount of the child tax credit if they earn between $ 0 and $ 75,000. $ as sole filer (or $ 112,500 for head of household) or $ 150,000 for joint filers.

“Most people won’t go from $ 0 to $ 300,000 a year,” she said. “I don’t think this situation will be extremely common. “

She noted that even if a family’s income increased from $ 20,000 to $ 300,000 per year, the family child tax credit would only decrease from $ 3,000 to $ 2,000 per child.

“Only half of that amount is advanced, so it’s not a huge liability,” Maag said. “And it’s a very high income family. They can probably absorb this change in their taxes.

Payments are non-taxable income. These are tax credits that reduce a family’s tax bill. Families can choose to opt out of monthly payments in favor of receiving their child tax credit as a lump sum after filing their taxes using the IRS. Child Tax Credit Update Portal. The deadline for opting out is approximately two weeks before a payment is made.

The only way a family can repay the money received in advance payments is if the household actually qualifies for a 2021 child tax credit that is smaller than what the IRS estimated when distributing the payments.

Ultimately, Maag said “we don’t know the exact answer” to how many families this could impact.

Political decision

One tweet said that “you have to return EVERY PENNY” of child tax credit advance payments when you file your 2021 taxes.

Since the IRS calculated eligibility for payments based on a family’s 2020 income tax return, it is possible that some families, such as those whose incomes increased significantly in 2021 or parents who claim alternatively children as dependents have to reimburse.

However, “must” communicates a sense of certainty that is at odds with the reality of the situation. And even families who end up having to pay off some of the children’s credit won’t necessarily have to pay off “EVERY PENNY.” Finally, the law provides protections to ensure that families with the lowest incomes do not have to repay erroneous payments.

Politifact evaluates this claim Mostly False.

Tweeter, July 15, 2021 Internal Revenue Service, “2021 Child tax credit and advance payments of the child tax credit – Subject A: General information”, accessed July 18, 2021 Internal Revenue Service, “2021 Advance Payments of the Child Tax Credit and the Child Tax Credit – Theme E: Process of Advance Payment of the Child Tax Credit”, accessed July 18, 2021, “The Child Tax Credit” accessed July 18, 2021

Interview with Elaine Maag, Tax Policy Expert and Senior Research Associate at the Tax Policy Center, July 20, 2021

Tax service, “Child Tax Credit Update Portal”, accessed July 19, 2021

Report of the Congress Research Service, “The Child Tax Credit: Temporary Extension for 2021 under the American Rescue Plan Act of 2021” May 12, 2021

NPR, “The expanded child tax credit has arrived. Here is what you need to know ”, July 15, 2021

The news of the 19th, “As child tax credit payments reach families, mothers see a way out of poverty,” July 15, 2021

PolitFact, “What to do with the monthly child tax credit starting in July?” “ June 23, 2021

The APC Journal, «ICYMI | A first look at the American law on the 2021 rescue plan ”, May 2021

Brandy Martz, “American bailout: advanced child tax credit”, June 16, 2021, “Child tax credit 2021: will you have to repay the child tax credit? “ July 16, 2021

CNBC, “Millions of Families Have Received These IRS Letters Regarding the Early Childhood Tax Credit – Here’s What They Say” July 16, 2021

CNBC, “You may have to repay part of the new $ 3,000 child tax credit” April 21, 2021

ABC 27 News, “Should you withdraw from early childhood tax credit payments?” “ July 16, 2021

CNBC, “Why may some divorced parents want to opt out of the advance child tax credit? “ July 15, 2021, “Here’s who is not eligible for the $ 300 child tax credit payment this week” July 14, 2021

The Wall Street Journal, “Your child tax credit payment has just arrived. Are you sure you want it? “ July 15, 2021

Image 11, “President Joe Biden Marks First Day of Newly Increased Child Tax Credit Payments,” July 15, 2021

CNBC, “This is the last day to withdraw from the first early payment of the child tax credit”, June 28, 2021

Tweeter, July 17, 2021

Tweeter, July 20, 2021

Tweeter, July 20, 2021

Tweeter, July 17, 2021

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