IRS releases new FAQs on Child Tax Credit

The Internal Revenue Service issued a set of frequently asked questions Monday for filing season, with new material added on the expanded Child Tax Credit.

The updated FAQ document answers questions such as whether the amount of Child Tax Credit will be reduced if a taxpayer’s 2021 income is too high; how 2021 modified adjusted gross income reduces the amount of the Child Tax Credit; and how the first phaseout reduces the 2021 Child Tax Credit to $2,000 per child.

The FAQs come as the IRS has sent millions of letters to taxpayers about the amount they received in monthly advance CTC payments, and some are discovering that they will need to repay some of that money if they earned too much income last year. The IRS has also admitted that some of the letters contain incorrect and out-of-date information.

The IRS noted that 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.

“Those that received less than the amount they are eligible for can claim a credit for the remaining amount,” said the IRS. “Those that received more than they are eligible for may need to repay some or all of the excess amount.”

The IRS has been sending Letter 6419 this month to provide the total amount of advance Child Tax Credit payments that were received in 2021. The IRS is encouraging taxpayers who received these letters to make sure they hold onto them to help them prepare their 2021 federal tax returns in 2022.

Samuel Corum/Bloomberg

However, the agency also suggested last week that the letters may not always have the most up-to-date numbers and is asking taxpayers to check their online taxpayer accounts for the amount the IRS has on record, rather than the amount listed on the letters that were sent to taxpayers or even in the new Child Tax Credit portal (see story).

The new FAQs include the following topics:

• Topic A: 2021 Child Tax Credit Basics;
• Topic B: Eligibility Rules for Claiming the 2021 Child Tax Credit on a 2021 Tax Return;
• Topic C: Reconciling Advance Child Tax Credit Payments and Claiming the 2021 Child Tax Credit on Your 2021 Tax Return;
• Topic D: Claiming the 2021 Child Tax Credit If You Don’t Normally File a Tax Return; and,
• Topic E: Commonly Asked Immigration-Related Questions.

On Tuesday, the IRS released another set of FAQs about the Child Tax Credit. The updated FAQ modifies a question and adds a new question:

• Question 4, Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return
• Question 10, Topic H: Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return

The IRS said the FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible.