Tax Tips: What do I do if someone else received my dependent’s Child Tax Credit?

For tax year 2021, there were big changes to the Child Tax Credit. Find out how someone else’s claim could affect your tax return. 

Child Tax Credit Background

The maximum credit was increased from $2,000 to $3,000 for children aged six to 17. For children aged under six, it was increased to $3,600. Those who claimed children in their 2020 tax return (or 2019 if 2020 was not filed) automatically received monthly advanced Child Tax Credit Payments from July through December. 

These payments were to total up to half of the your projected Child Tax Credit; therefore, you should have received half of your Child Tax Credit before filing your 2021 tax return. You also could have opted out of the payments and received a lump sum if you wanted, but most taxpayers did not. You can read more about the Child Tax Credit and Advance Child Tax Credit payments here. 

Common changes to dependant claims

In some cases, a person who received the advance Child Tax Credit payments won’t be claiming the child for 2021. 

This may happen when parents alternate which parent claims the child each tax season.

There are also a variety of situations where household situations change and may result in a different person claiming the child in 2021. For example, when a different relative is caring for and housing the child. Another example is when an adoption occurs.

How someone else’s claim affects my tax return

The important thing to know is that someone else receiving the advance Child Tax Credit payments will not impact a valid 2021 tax return claiming a qualifying child. 

If you didn’t receive the advance monthly Child Tax Credit payments but you are eligible for the Child Tax Credit (or a portion of it), you’ll receive the full amount of the Child Tax Credit for which you are eligible when you file your 2021 tax return.

There is one provision – someone wrongly claims the child on their 2021 tax return. 

If someone else wrongly files an electronic return first, your electronic tax return will be rejected when filed. At that point, you would have to mail in your tax return. This will delay processing, but you should still receive the refund to which you are entitled. 

And later the IRS will send letters out to each taxpayer who claimed the child, and you will go through a process of determining who should rightfully claim the child. 

The other person will owe the IRS money based on the credit, penalties, and interest. To avoid being the person who owes money, make sure that you are the one who should be claiming the child. The IRS Interactive Tax Assistant can help you determine that. 

How someone else’s claim affects their tax return

What happens to the person who received advance Child Tax Credit payments but will not be claiming the child? 

When that person fills out their 2021 tax return, they will be required to report how much they received in payments in 2021 and the tax software will determine if they will have to pay it back or not. 

In some cases, a safe harbor provision may apply so that they don’t have to pay back some or all of the advance payments. 

If the advance payments do need to be paid back, then it means that their tax refund will be smaller than it otherwise would be, or in some cases, they will owe taxes when filing their 2021 tax return. 

Whether you received the advance Child Tax Credit payments or not, if you claim the child on your valid 2021 tax return, you will receive the Child Tax Credit for which you are eligible.

I do encourage you to make the best choices for you and your child for using any tax refund. This child tax credit has lifted some families and children out of poverty so let’s make the most of it.