The question of which parent receives the Advance Child Tax Credit when parents are divorced is being frequently searched on Google. In response, we’ve prepared this article.
President Biden and the 2021 Congress authorized advance payments on the child tax credit families receive through their annual 1040 federal income tax returns. This means that instead of receiving one large lump sum in 2022, parents will receive monthly payments in 2021 and a smaller lump sum when they file their 2021 tax return taxes in 2022. The payments are intended to assist families struggling due to the COVID-19 global pandemic, but may become permanent assistance for low income families. The payments are based on which parent claimed the minor child(ren) as dependents in the year 2020. As a result of the Federal Government’s determination on how to issue the child tax credit payments, many parents are at odds over whether these advance payments are to be split equally or kept solely by only one parent – especially when a court Order requires alternating claiming child(ren) on each parent’s Federal Income Tax returns.
Fortunately for parents, the IRS has already considered this issue and has established a plan to resolve the misappropriation of the advance child tax credit. For example, If Parent A claims the minor child(ren) on their 2020 taxes and therefore receives the advance child tax credit payments, and Parent B is granted the right to claim the child(ren) for the 2021 tax year, the advance payments that Parent A receives will be taken from Parent A’s 2021 tax return and paid out to Parent B as part of their 2021 tax refund.
It is important to note that this resolution only applies if the parents are alternating claiming the minor child(ren) as dependents on their individual Federal Income tax return. If only one parent is granted the right to claim the minor child(ren) as dependents on their Federal Income Tax return, the question remains whether that parent should be sharing the advance tax credit with the other parent at all? The short answer is no. The advance payments are not equivalent to Federal economic stimulus funds. The advance child tax credit payments are personal in nature and relate to a payor’s deductions when they file their individual Federal Income Tax returns.