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Child tax credit: Do I need to pay it back?

Parents received advanced payments on their 2021 child tax credit last year, ahead of tax season.

paperwork on a desk detailing tax credits like the child tax credit for the IRS with hundred dollar bills

Some are now wondering if they will be required to pay it back.

Thankfully, the IRS is sending out Letter 6419, which will detail whether you got too much money from the agency and whether or not you need to pay it back.

You’ll know if you owe by comparing the money you were sent with what you can claim.

If the money you were sent exceeds what you can claim, you might need to pay that back.

The payments sent were based on your 2020 returns, not your 2021 returns like they normally would be.

This means any changes between 2020 and 2021 were not taken into account by the IRS.

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When will I need to pay back the child tax credit?

Anyone who qualifies for repayment protection will not need to pay back an excess amount they might have.

If you do not qualify, you’ll have to report the excess on your taxes as income.

This will reduce the size of your refund or increase what you owe.

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To qualify for repayment protection you must

  • have had a residence in the U.S. for over half of 2020
  • have an AGI at or below certain amounts based on your filing status in 2021

Most that owe will have their refund reduced.

The IRS can work with taxpayers who cannot afford to pay if they end up owing.

Repayment protection explained

If you do qualify for the protection, your tax liability from the extra payment is reduced by up to the full payment protection amount.

The amount you’re protected by is based on a formula.

You’ll multiply $2,000 by the number of qualifying children the IRS takes into account to determine the estimate of your payments.

You’ll then subtract the number of children taken into account that determine your allowed child tax credit.

If you claimed three kids in 2020, but only one on your 2021 tax return, you’ll get up to $4,000 in protection, or $2,000 for each qualifying child.

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