Advance Childcare Tax Credit Issue

[scbarnes101989]

I received a letter from the IRS saying that they found a discrepancy and instead of my full refund I now owe $341 because I accepted the Advance Childcare Tax Credit and didn't report it. I didn't realize I could opt out and my ex could opt in, so I was sent the advance tax credits via direct deposit and then I turned around and I sent all of that money to my ex who will claim him this year as he was technically entitled to it. I can prove I sent these payments. Is there any way to fight having to pay since I did not keep the money myself? 

[xmasbaby0]

No.   The IRS does not sort out what you did with the payments once they sent them to you.   If the payments were issued to you then you were required to enter them on your tax return.   If your income for 2021 is above the limit for repayment protection then you are required to repay them.   If your "ex" is nice, maybe he will repay it to you, since when he prepares his own tax return he can get the FULL amount of the CTC, and already got the money that was sent to you..   But that is for you and the ex to work out.

TurboTax calculates the Repayment Protection.  This determines if a person is required to repay the advance CTC.

What is Repayment Protection?

Repayment protection is an income-based program that reduces the amount of excess advance Child Tax Credit payments you have to repay.

Full repayment protection equals $2,000, multiplied by the following:

• The number of qualifying children that the IRS took into account when estimating your advance Child Tax Credit payments, minus
• The number of qualifying children you’re claiming on your 2021 tax return.

To be eligible for full repayment protection, your adjusted gross income (AGI) for the 2021 tax year must be at or below the following:

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

 You won’t qualify for any repayment protection if your modified AGI is at or above the amounts listed below based on the filing status on your 2021 tax return.

• $120,000 if you are married and filing a joint return or if filing as a qualifying widow or widower;
• $100,000 if you are filing as head of household; and
• $80,000 if you are a single filer or are married and filing a separate return.

For information on the definition of modified AGI, see Topic C: Calculation of the 2021 Child Tax Credit. 

[MinhT1]

Your giving the money to your ex-spouse is a matter between you and your ex.

You could ask your ex to refund you the money as he will be entitled to the full child tax credit when he claims the child for 2021.