Child Custody and Advance Tax Credits

          A known part of the American Rescue Plan (ARP) Act, which was enacted in March 2021, is that there would be an Advance Child Tax Credit. These are advance payments of what would be expected to be claimed on the 2021 tax return. However, things can become complicated when there is shared custody of the children.

          How does the Internal Revenue Service (IRS) decide who gets these advance payments? The information is based off of the 2020 or 2019 tax returns. So the parent that claimed them in the most recent year will be the one who gets the tax credit. If they alternate years claiming the tax and the one who will claim it is not getting the payments, they should remove themselves from this program. This will allow the other parent to claim the credit in their 2021 tax return. The other parent may need to repay the IRS if they received advance payments. If changes need to be made, they should be done before the end of the year.

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