Tax Tips 2022: Tips for Parents Who Share Custody
Do You Alternate Tax Benefits with Your Co-Parent?
If you and a former spouse or partner share children, you may have a legal agreement outlining who claims the child on their taxes. If this is the case, your tax situation may be more complicated this year because of the 2021 recovery rebate credit. Below we review what you need to know before filling out your 2021 federal tax return.
Understanding the Recovery Rebate Credit
As a result of the ongoing situation with the COVID-19 pandemic, the government issued qualifying taxpayers Economic Impact Payments. There have been three rounds of these payments, the last of which was an advanced payment of the 2021 Recovery Rebate Credit. The IRS used taxpayers’ 2019 and 2020 tax information to determine eligibility for these payments.
The 2021 Recovery Rebate Credit is a form of coronavirus tax relief, similar to the 2020 Recovery Rebate Credit. These credits were issued in advance as stimulus payments. However, if you are missing a stimulus payment that you should have received or didn’t receive the full amount you were eligible for, you may claim the Recovery Rebate Credit on your taxes.
How Parents Should Account for Stimulus Checks Received for Qualified Dependents
If you are a divorced parent with qualifying dependents, you probably have questions about how you should deal with the stimulus payments on your taxes.
The IRS has provided the following information regarding who can claim the credit and what to do if you received a payment for a dependent that you won’t be claiming on your 2021 taxes:
- You will be claiming your child on your 2021 tax return: If you did not receive a third-round payment for a qualified dependent that you will be claiming on your 2021 tax return, you can claim the 2021 Recovery Rebate Credit, regardless of any Economic Payments received by your child’s other parent.
- You will not be claiming your child on your 2021 tax return: If you did receive a third-round stimulus check for a dependent, you will not be required to pay back all or part of the payment if, based on your 2021 returns, you should have received less.
What About Advanced Child Tax Credits?
In 2021, the IRS used information from taxpayers’ 2019 and 2020 income tax returns who would receive an advance child tax credit payment. If a parent claimed the Child Tax Credit on their 2020 return, they would have received an advance child tax credit payment for any qualifying children in 2021. This may make things more complicated for co-parents who alternate tax benefits.
The IRS allowed families to unenroll from advance child tax credit payments if they knew they would not claim their child on their 2021 taxes. Parents could do this through the Child Tax Credit Update Portal on IRS.gov. Parents who did not unenroll and therefore received payments for children they will not claim on their 2021 taxes may have to repay those payments when they file their taxes. However, those parents may be excused from repaying if they qualify for repayment protection.
Visit the IRS website’s page on reconciling your advance child tax credit payments to determine if you qualify for this protection.
Note: if you are a parent who did not receive advance payments of the Child Tax Credit, you can claim the full amount of the credit on your 2021 tax returns, even if your co-parent received the advance payments.
How to Prepare for Filing Your Taxes
It is incredibly important that you file your taxes on time and accurately. Doing so can be difficult when dealing with these advanced tax credit payments. Taking some extra time to prepare to file can help you file your taxes correctly.
If you received advance credits in 2021, you should compare the total amount you received with the amount you are eligible to claim. To find out how much you received in advanced payments, you can log into your IRS account. If you are married and you and your spouse receive joint payments, you should both log into your individual accounts to retrieve your specific amounts.
More helpful links from the IRS:
- Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents
- General Information for filing your individual tax return (Form 1040)
- How to calculate your 2021 Recovery Rebate Credit
Don’t forget! Your 2021 Taxes are due on Monday, April 18, 2022.
Tax mistakes can have serious consequences. If you’re dealing with a tax-related legal problem, reach out to Brandon Gardner & Associates, PLC, and schedule a consultation. We are standing by to help.