Turbo tax says that the advance child credit has to be repaid

[goyal_raj]

Hi,

I file my tax jointly with my wife and have a 12 year old kid. I received advance child tax credit in 2021 and the yearend letter from IRS says that both me and my wife received 500 each for 0ne child. However, when i enter that information in Turbo tax it says that I am not eligible and i need to return the credit.

Our combined AGI is between 200k and 300k and I have paid all expenses for that child for the entire year and have lived in the US for the full year.

Any reason why I may not be eligible?

RG

[xmasbaby0]

Your income is too high.

Q A5.  Will the amount of my Child Tax Credit be reduced if my 2021 income is too high? (added Janua...

A5. Yes, if your 2021 income is high enough, the amount of Child Tax Credit you can claim will be reduced.  The amount of your Child Tax Credit will not be reduced if your 2021 modified adjusted gross income (AGI) is at or below:

• $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
• $112,500 if you are filing as a head of household; or
• $75,000 if you are a single filer or are married and filing a separate return.

[AliciaP1]

There are AGI limits to the Child Tax Credit for 2021, and although your AGI exceeds the married filing joint limit, you should still qualify for a $2,000 (before Advance Child Tax Credit payments) credit as long as your AGI is less than $400,000.  Be sure your child meets all the qualifications also:

• Be under age 18 at the end of the tax year
• Is your child, stepchild, foster child, adopted child, sibling, step-sibling, half-sibling, or a descendant of any of them (for example, a grandchild, niece, or nephew)
• Has their own Social Security Number
  • Children with ITINs don't qualify, but may instead be eligible for the $500 Credit for Other Dependents
• Lived with you for more than half the year
• Didn't support themself (didn't pay more than half their own expenses)
• Is a U.S. citizen, U.S. national, or U.S. resident alien
  • Residents of Canada or Mexico don't qualify

[goyal_raj]

Thanks Alicia. My child has a ITIN and not a SSN. May be that is the reason. However, i do not see any credit for other dependents calculated by Turbo tax.

Lat year I got 2500 under item 19 on 1040- Nonrefundable child tax credit or credit for other dependents from Schedule 8812. But this year Turbo tax shows it as blank. My other kid turned 18 at the start of DEc in 2020, so that should not belong to him i think.

RG

[AliciaP1 · Accepted solution]

Yes, you are correct.  For the refundable Child Tax Credit in 2021, your child has to have an SSN to be qualified.  Therefore, you will have to pay back the Advance Child Tax Credit you received since your younger child does not qualify with an ITIN.

Your other child does not qualify for the Child Tax Credit in 2021 due to being over age 18 at the end of 2021.  The Additional Child Tax Credit that was valid for 2020, does not exist in 2021 with the changes to the structure of the credit.

[goyal_raj]

Hi AliciaP1,

I am sorry I got confused. My child does have a SSN. Any reason why Turbo tax asks me to pay back the child credit then?

Thanks,

Raj

[JillS56]

Yes, if you were not entitled to the Advanced Child Tax Credit.  The Advanced Child Tax Credit had two separate phase-outs.   

The first phase out:

The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:

• $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
• $112,500 if filing as head of household; or
• $75,000 if you are a single filer or are married and filing a separate return.

The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.

The second phase-out occurs:

The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:

• $400,000 if married and filing a joint return; or
• $200,000 for all other filing statuses.

The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.

Advanced Child Tax Credit FAQs

The reconciliation of the Advanced Child Tax Credit is part of the 2021 Tax Return.   If you were not entitled to the credit or you received more credit than you were supposed to the adjustment will be made on the 2021 Tax Return.

[goyal_raj]

Thanks JillS56.

However, the phase out was not clear to me. Let's say someone is at 250k AGI....which phase out would apply and would there be any child credit received?

Thanks

[Vanessa A]

If you are married filing a joint return, the phaseout would be $400,000 so yes, for a couple that had an AGI of $250k, they would still receive the $2,000 child tax credit. You can look at line 19 of your 1040 to see if you are getting the $2,000 child tax credit. 

You can see the amount on line 19 using forms mode in TurboTax Desktop or if you are using TurboTax online by clicking the following:

• Tax Tools
• Tools
• View Tax Summary
• Preview My 1040

[goyal_raj]

Thanks Vanessa.

The line 19 is blank on my 1040. And Turbo tax says that I should return the 1000 dollars received as advance child credit. Last year I did see some amount there. What should i change in Turbo tax given that the form for advance child credit is quite simple?

Rajesh

[JillS56]

You need to enter the Child Tax Credit based on what you did receive.   TurboTax will do the calculation.   You may be able to get the penalties waived.  To do this:

1. Open your return in TurboTax 
2. Go to Federal 
3. Go to Other Tax Situations
4. Scroll down to Additional Tax Payments
5. Click on Show More
6. Click on Start or Revisit next to Underpayment Penalties
7. Answer the questions based on your situation.