Government law specified that excess amount on the child tax credit must be paid back on your 2021 tax return. To avoid any inconvenience, there are two actions you can take if the IRS accidentally overpaid you.
Child tax credit payments have been sent out to eligible families starting July. Unfortunately, significant changes have been also added to the 2021 child tax credit, and this includes paying back extra money that exceeds your eligibility.
The IRS is scheduled to pay half of the total child tax credit money as monthly recurring payments this year. However, the second half of the payment would be released as a one-time-payment during tax season next year.
Kiplinger warned that overpayments will be fairly common on the child tax credit for many different reasons.
IRS Overpaid Child Tax Credit
In highlight, IRS uses 2019 or 2020 tax returns to check your eligibility status, depending on which one is more recently filed. Unfortunately, this does not accurately reflect your status. You might have gained new dependents this 2021, or your adjusted gross income (AGI) might have improved. Changes like these would be noted on your 2021 tax return, resulting in new eligibility and monetary budgets for your child tax credit.
Five other situations where the IRS might overpay you are listed in this article.
If any of these circumstances applies to you, then be warned, the IRS might charge you with overpayment and demand the return of your child tax credit in total amount. Fortunately, you can avoid dealing with this headache.
Child Tax Credit Portal, Updates, and More
Cnet recommended opting out on receiving child tax credit money this year. Instead, aim to receive the child tax credit in one lump sum by next year.
To do this, you need to opt-out of the monthly recurring program. IRS said that you have to unenroll from the advance checks three days before the first Thursday of the following month. It is already too late to opt-out of the July payment, but other unenrollment deadlines for the monthly payments are as follows.
- Aug. 2 (August Payment)
- Aug. 30 (September Payment)
- Oct. 4 (October Payment)
- Nov. 1 (November Payment)
- Nov. 29 (December Payment)
You can opt-out of the monthly payment through the Child Tax Credit Portal on the IRS website. You will need either an IRS account or an ID.me account to access these tools. Kiplinger warned that some Child Tax Credit Portal features might still be updating and should be available later in summer.
A second option you can do is to use the Child Tax Credit Portal to update the information that the IRS has on you. Here you can indicate if certain circumstances have changed, like a new child, a different mailing address, new marital status, or changed bank account. Changes might take five to seven days before they would be applied.
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