Claiming Dependents for Divorced Parents

[sagardin]

As a part of my divorce agreement my ex-husband and I alternate years we claim our daughter. How does this effect the stimulus child tax credit in 2021 if I cannot claim her? Am I still eligible? Do I have to pay back the $250/month I've been receiving for advanced payments?

[PoojaT27 · Accepted solution]

Yes. Because you claimed your child on your 2020 tax return, the IRS will automatically disburse advance Child Tax Credit payments to you even though you know you won't be claiming your child on your 2021 tax return. When you file your 2021 tax return (the one due in April of 2022), you could have to pay back the advance payments in excess of the Child Tax Credit you're entitled to claim on that return. You may be excused from repaying some or all of the excess amount if you qualify for repayment protection. For more information about repayment protection, see Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return.

If you know you won't be claiming the Child Tax Credit on your 2021 return, then you should go to the IRS website to unenroll from receiving monthly payments using the Child Tax Credit Update Portal (CTC UP). If things change again and you are entitled to the Child Tax Credit for 2021, you can claim the full amount on your tax return when you file next year.

https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-t... 

[shnnnbarany]

I am in the same boat. Except I didn't keep the CTC sent to me because I knew I wasn't going to be claiming my dependent next year. I sent the CTC payment directly to my ex-husband the moment it hit my account. Is there another action I could take with the IRS to prove that the CTC went to my ex since he's claiming our dependent in 2022 so I don't have to repay the CTC back to them when I file?

[PoojaT27]

Since, the IRS sent the payments to you, you will need to reconcile the advance child tax credit payments on your tax return. You may qualify for payment protection and you will not have to pay it back. 

 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.

From your question, it sounds like you are on good terms with your ex and hopefully you can reach an agreement with them on on giving those payments back to you.

The IRS has on record they made the payments to you and what you do with them after that is not going to alter the tax return for you.

[shnnnbarany]

Thanks! The page linked on reconciling the CTC payments and payment protection states the parameters for payment protection eligibility, but will payment protection eligibility automatically be recognized when filing with TurboTax online, or is there a separate process necessary for applying for payment protection if I do qualify?

[PoojaT27]

If you qualify for payment protection, the amount of your tax liability from excess advance Child Tax Credit payments is reduced by up to the full repayment protection amount depending on your AGI. 

You will be able to apply the full repayment protection amount of $2,000 for each excess qualifying child if your modified adjusted gross income (AGI) is at or below the following amounts based on the filing status on your 2021 tax return:

• $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.

If your AGI is more than mentioned above then you will qualify for partial payment protection and that will be automatically applied to your tax return, No additional step is required on your end. Turbo tax is updated with the latest laws and regulations.