IRS adds more guidance on CTC payments

The Internal Revenue Service has updated the information on its frequently asked questions page for the Child Tax Credit and Advance Child Tax Credit payments to help families and their tax preparers properly claim the credit when they file their 2021 tax returns.

The IRS said Tuesday it has done an extensive FAQ update, which includes multiple streamlined questions for use by taxpayers and tax professionals. It’s being issued as expeditiously as possible just two weeks ahead of the start of tax season on Jan. 24.

The expansion of the Child Tax Credit to as much as $3,600 per child was part of the Biden administration’s efforts to lower the child poverty level. Parents had been receiving monthly payments in advance of claiming the tax credit until last month, when the program expired. The administration had aimed to extend the program through this year as part of the Build Back Better Act, but those efforts have stalled in the evenly divided Senate, where Republicans remain uniformly opposed to the tax and social spending package and moderate Senate Democrats Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have not agreed to support it.

However, taxpayers and their preparers will still be expected to account for the monthly advance payments they received last year on their tax returns to make sure they didn’t receive too much or too little.

Samuel Corum/Bloomberg

“Recipients of advance Child Tax Credit payments will need to compare the amount of payments received during 2021 with the amount of the Child Tax Credit that can be claimed on their 2021 tax return,” said the IRS in a news release Tuesday. “Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount.”

The IRS will be sending out a letter, Letter 6419, this month listing the total amount of advance Child Tax Credit payments that were received last year. The IRS is asking taxpayers who receive these letters to be sure to hold onto them to help them prepare their 2021 federal tax returns in 2022.

The updates on the FAQ page can be found in:

• Topic A: General Information
• Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit
• Topic C: Calculation of the 2021 Child Tax Credit
• Topic D: Calculation of Advance Child Tax Credit Payments
• Topic E: Advance Payment Process of the Child Tax Credit
• Topic F: Updating Your Child Tax Credit Information During 2021
• Topic G: Receiving Advance Child Tax Credit Payments
• Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return
• Topic I: U.S. Territory Residents and Advance Child Tax Credit Payments
• Topic J: Unenrolling from Advance Payments
• Topic K: Verifying Your Identity to View your Payments
• Topic L: Commonly Asked Shared-Custody Questions
• Topic M: Commonly Asked Immigration-Related Questions
• Topic N: Returning a Payment

The IRS is able to update FAQ pages with the latest guidance more quickly than the more traditional tax regulations, which are supposed to first go out as proposed regulations and then are subject to a comment period before they’re finalized. After coming under criticism, though, for the ever-changing nature of the FAQ pages, the IRS is trying to be more transparent about the process and the extent to which taxpayers and tax professionals can rely on the FAQ guidance. More information about reliance on FAQ pages and the more authoritative Internal Revenue Bulletin is available here.