Please. Help. Me!!!!Deceased Mother, AdvCTC, adopting brother

[tayneal120]

My mother passed away in April. As a result, I got custody of my 14-year-old brother. 

My mother had a relative (Let's call him John) claim my brother on their tax return in 2020. As a result, John received the Advance Child Tax Credit and then gave the money to me. 

Now that I am claiming his as a dependent, I just don't know what to do as I am filing. TurboTax asks if you got the money. Let's say I say, "Yes," but then I only enter enough money to add up to the amounts on my 6419. I got AdvCTC for my two daughters direct deposited into my account, but now I am claiming all 3 kids as dependents. 

What should I do? What is going to happen to John? I'm not planning on falsifying anything but I don't want to get my refund bogged down in the system either. 

Maybe I should say, No, I didn't get the money for my brother and then pay that money to John...

[xmasbaby0]

You will get a letter 6419 that shows any advance child tax credit money you received in 2021.   You have to enter that exactly.    And so will "John" have to enter his own letter 6419 on his own return.   If you say you received more than your letter indicates  (because John gave you the money) you will create a mismatch in the system that will delay your refund for months.   Do not do that.

When you claim your brother for 2021 you get the full amount of the CTC.   We know...in actuality you got more because John gave you that money.    

John may or may not have to pay back the advance CTC payments--it will be based on his 2021 AGI.   You can be on your honor to do the right thing especially if he has to repay the money he gave to you.  But that does not go on either of your tax returns.

The IRS is going to have enough trouble with this new credit and the confusion generated by it without having to contend with "side deals" made between people.   Only enter the amounts from your letters or you will face long delays.

[xmasbaby0]

Oh....and you can also get the $1400 3rd EIP payment for claiming your brother. Use the recovery rebate credit in Federal Review.     So sorry about your mom, and best of luck to you and your little brother.

[tayneal120]

Thank you so much. That really helps. 

[Opus 17]

@tayneal120 

It is likely that if you incorrectly stated that you received advanced payments, so that you claimed a reduced child tax credit on your tax return, the IRS would pay what you claimed even though it was less than what you were entitled to.  The IRS almost never reduces your tax or increases your refund beyond what you request in writing, even if you are legally entitled to it.

However, “John“ will still have to repay any advanced credit on his tax return if he does not claim the child as a dependent, unless John is low income and qualifies for repayment protection.

You might as well claim the entire credit, and then you can repay John if that seems like the right thing to do.

[Critter-3]

If ONLY John got the advance on the brother (even if he gave it to you) then  John with get the 6419 letter and only John will report this on his return since he claimed the child on the 2020 return.   Since the IRS did not pay you the advance directly then you will  ONLY report any advance payments you got for your kids ONLY on your return ... this will give you the FULL CTC  for the brother and if you want to repay John for his kindness you can since HE must report it on his return and could possibly have to pay back that entire advance.   This is a crazy situation this year but this is how the rules were written even if it is not fair.