Fact Finders: How does the child tax credit work for divorced parents who share custody?

Published: Jul. 16, 2021 at 7:10 PM MST
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TUCSON, Ariz. (KOLD News 13) - More money is in the bank for millions of families as the IRS deposits roughly $15 billion into bank accounts across the country.

Nearly 60 million children are eligible for the monthly expanded child tax credit.

Monthly payments of up to $300 per child under the age of six and up to $250 per child under the age of 17 are the result of a possibly temporary expansion of the child tax credit that is part of the COVID-19 relief package signed by President Joe Biden in March.

Households that filed a 2020 or 2019 federal income tax return and claimed the regular child tax credit will get payments automatically.

How does the expanded child tax credit work for divorced parents who alternate claiming their child? Should the person who claimed the child in 2020 opt out of the monthly tax credit?

It is a question we took to Eric Freeman, a CPA and Tax Senior Manager for BeachFleischman.

“The person who took the credit in 2020, but is not taking it in 2021, should go in an un-enroll so they don’t risk having to pay back potentially all or some of the credit when they file their taxes later,” Freeman said.

According to the IRS, you have until August 2 to stop the payments.

“The parent who is claiming in 2021, but did not in 2020, should be able to add a dependent using the IRS’ child tax credit update portal,” Freeman said.

The IRS does not give an exact date, but according to the portal, by late summer people should be able to make changes to their dependents.

If you did not have a filing requirement last year, Freeman encourages you to log onto the IRS website and use this non-filers tool.

“There you can add the dependent you have that way you can still get the credit because you can take this credit even if you didn’t earn any income,” Freeman said.

If the parents of minor children are separated, but not divorced, and filed joint returns in 2019 and 2020, and the child tax credit was claimed by both parents, the advance payment will go to the bank account on the tax year 2020 return, or a check will be mailed to the address of record on the tax return.

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