Advanced Child Tax Credit, Changing from MFJ to HoH

[jimcrack68]

My wife and I combined homes with three of her children and two of mine. We filed MFJ in 2020. The IRS sent Advanced Child Tax Credit checks made out to both of us.

We now live apart, her with her three children and me with my two. We split the Advanced Child Tax Credit checks proportionally. We qualify and want to file as Heads of Households.  

Turbo Tax instructs, "Enter the total amount of your advance payments. Avoid significant delays with the IRS by entering the exact total amount."

So, should we enter the split amounts? Or does one of us enter the whole (exact) amount and the other enter zero?

[rjs]

Soon you and your wife will each receive a Letter 6419 from the IRS showing the amount of advance payments that you received. On your tax return you enter the amount shown on your own Letter 6419. Your wife will enter the amount shown on her Letter 6419. The total of the two letters will be the total amount that you received.

If the results on your tax returns do not come out to what you and your wife consider a fair allocation, one of you can pay the other to settle up between you.

[jimcrack68]

We will receive separate letters even though we filed our 2020 return jointly and received only one check per month, made out to both of us? I’m not sure how the IRS would even know.

[Critter-3]

First you can still file a joint return since you are still married and you can only use HOH if you did not live together anytime during the last 6 months of the year.  

Next this advance CTC payments are so new the IRS FAQs on this subject have not yet been updated ... so don't rush to file since any return with the CTC on it will not process before the end of February and ones with advance payments could take even longer.    https://www.irs.gov/individuals/understanding-your-letter-6417

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

[rjs]

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@jimcrack68 wrote:

We will receive separate letters even though we filed our 2020 return jointly and received only one check per month, made out to both of us?

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Yes, you will each get a separate letter.

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@jimcrack68 wrote:

I’m not sure how the IRS would even know.

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What is it that you're not sure the IRS would know? They know you filed jointly, and they know how much money they sent you. They don't know which children are yours and which are your wife's. They based the payments on the total number of qualifying children on your joint 2020 tax return. I think they will simply split the total amount of advance payments equally. (Don't rely on what I think. Wait until you get the letters.) That's why the results on your tax returns might not be what you want. But you each must enter the amount from the letter, even if it's not the way that you split the payments between you. As I said earlier, you can settle up between you later.

If, as Critter-3 suggested, you file jointly for 2021, you will still enter the amounts from each of your letters separately, but TurboTax will add them together and put the total amount on the tax form.

[jimcrack68]

Oh, my aching head. I wish I had stopped the advance payments before they started.

I guess we will wait and see on 6419 letters. I expect one of us will take the hit while the other will get a bonus, and then we will work it out.

Advance CTC payments to MFJ filers who change to HoH is not a scenario I can find at IRS.gov. It seems like they should disallow repayment protection unless both filers meet the criteria. 

[jimcrack68]

Critter-3 and rjs: we are both filing our 2021 returns as HoH (have not lived together, maintain two separate households on separate incomes). With the $10,000 SALT limit, since we both independently own homes, we make up the difference in the standard deductions. There are other reasons for filing HoH that I won't go into.

Our CTC checks, payable to Mr. and Mrs., totaled $7,000. For her, the CTC Update Portal reports $7,000. For him, the CTC Update Portal reports $7,000. Again, our total was $7,000, not $14,000.

When we do our separate returns as HoH, Turbo Tax tells us both:

You qualify, but received too much in advance payments

Child Tax Credit

It looks like you were paid more in advance Child Tax Credit payments than you qualify for. When this happens, the IRS requires you to repay some of the money you received.

We’ve added this amount to the taxes you owe.

I don't fault the program because I cannot find on the IRS site how to deal with our scenario, which is:

• 2020 return was MFJ.
• 2021 returns are HoH with dependents split between returns.

Have I missed it?

Should we expect the IRS to detect and resolve this?

[Critter-3]

The letter 6419 that will be mailed to each of you  should report 1/2 of the advance to each spouse and you have it correct ... you will need to report the amount you got even if you don't have the child on the 2021 return and see how much you need to repay.  Just the way the law was written. 

[DianeW777]

You are correct, you will not report more than what was actually received, which is $7,000 per your statement above. The following total amount is what is allowed for each child based on age, and the advance was expected to be no more than half of what would be allowed on the tax return for 2021.

• $3,600 per qualifying child under 6
• $3,000 per qualifying child age 6–17

The IRS will know the combined amount and will have a structure in place to identify it.  You can allocate to each of you based on what you would have received for your own children.  It is not yet clear, because they have not had time to post exactly how they want a situation like yours to be handled.

You can always mail your returns with a copy of your letter and an explanation about how it was divided.  Do not mail the returns together in the same envelope if you decide to file by mail.

As indicated above, you might consider waiting just a bit longer before finalizing and filing your returns.

Lastly, both of you should update your information in the IRS Portal.

[rjs · Accepted solution]

@jimcrack68  Disregard what the CTC Update Portal shows. You have to wait for the letters from the IRS. The letters will not show what the CTC Update Portal shows. You must enter the exact amount shown in the letters. You don't do any splitting or calculating. Just enter the amount from your IRS letter. No explanation will be needed. There will be nothing that has to be resolved. But you have to wait for the IRS letters.

[jimcrack68]

Letter 6419 arrived, showing half the CTC received in 2021.

Thanks for everyone's help and patience.