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Yes, you could owe money back to the IRS if you received advanced child tax credit payments

Eligibility was based on information from 2019 or 2020 tax returns. So, that information could be outdated for some families.
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ST. PETERSBURG, Fla. — Filing your taxes could be different this year if you received advanced child tax credit payments.

The advanced payments, part of the American Rescue Plan stimulus package, increased the annual child tax credit to $3,600 for children under age 6 and to $3,000 for kids age 6-17. It also made the credit available as an advance through monthly payments between July and December 2021.

But do have to pay that money back when you file your taxes?

THE QUESTION

Could you owe money back to the IRS if you received the advanced child tax credit payments?

THE SOURCES

THE ANSWER

This is true.

Yes, in some cases you might owe money back to the IRS if you received the advanced child tax credit payments. Eligibility for those payments was based on your 2019 or 2020 tax returns – information that could now be outdated as you prepare to file your 2021 return.

WHAT WE FOUND

The child tax credit has existed for decades, but usually it is paid out in a lump sum after you file your taxes.

Advanced payments were made available through the American Rescue Plan.

Eligibility to receive the advanced child tax credit payments was based on information from 2019 or 2020 tax returns, so that could mean some families received payments based on outdated information.

A family might’ve received more than they should’ve if adjusted gross income increased for 2021, according to University of Tampa accounting professor and certified public accountant (CPA) Steven Platau.

“So if you had a particularly banner 2021 and maybe not such a great 2019 or 2020, then the government may have paid you more than you were entitled to,” Platau said.

“The government did their best to get funds out quickly and then for those who weren’t entitled, they’ll have to even it up.”

Two "phase outs" for the child tax credit reduce eligibility for the increases, beginning at $75,000 for single parents or $150,000 for joint filers, and once modified adjusted gross income exceeds $200,000 for single filers and $400,000 for couples filing together.

You could also owe money back, Platau said, if you claimed more dependents in a previous year than are eligible for the credit in 2021.

  • If your child turned 18 and is no longer eligible
  • If you divorced and no longer claim the child as a dependent
  • If the child is no longer living

But, Platau explained you might not necessarily get a bill from the IRS even — if you do owe money.

That’s because the advanced monthly payments made possible under the American Rescue Plan were only equal to half the total amount you’d be owed under the Child Tax Credit. Normally, the money comes in a lump sum at tax time.

So, when you file your 2021 taxes, the second half of the credit could be used to offset any money owed.

With that in mind, our team previously verified that you still must claim the child tax credit when you file your 2021 returns in order to get the balance of the money you’re owed.

You could qualify for protection from having to repay if you meet certain income requirements, according to the IRS.

The IRS recently published this 21-page fact sheet answering frequently asked questions.

Before filing, be on the lookout for a letter from the IRS. Americans who received the monthly child tax credits will be receiving Letter 6419.

The IRS said this letter will tell you how much of the credit you received in advance monthly payments in 2021 and the number of qualifying children used to calculate that amount. This will help you figure out how much of the tax credit to claim on your tax returns.

People who received the monthly payments can also check how much they received through the CTC Update Portal on the IRS website.

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