How Should Stimulus Payments And Child Tax Credits Be Handled Between Parents
Throughout 2021, the federal government has been sending stimulus payments and child tax credits to families across the country. This pandemic relief was essential for many families, but for separated couples and divorced parents, the advanced child tax credits may create more questions, and more legal trouble.
Divorced If You Share Custody You Need To Know This About Stimulus Child Tax Credit For Your Tax Return
When the federal government started to send out monthly payments for the advanced child tax credit in the last six months of 2021, divorced parents and those who share custody were unsure of which parent should get the checks.
The same confusion stood for the third stimulus payment, which sent parents $1,400 for each of their eligible dependents.
Now that its time to file tax returns, parents should make sure the correct parent claims the benefits.
Its common for parents with shared custody to take turns claiming their children as dependents on their tax returns. One year on, one year off.
Heres how it works.
The monthly credit payments and the third stimulus payment were an advance of credits that would be taken on your 2021 tax return.
But because the IRS determined eligibility for the benefits based on 2020 tax returns or 2019 returns if the 2020 one wasnt processed yet its very possible the wrong parent got the benefit. So if a parent claimed a child in 2020, and thats the tax return the IRS based the payouts on, that parent probably would have gotten the advance child tax credit and stimulus payments, even though the other parent would be claiming the child for 2021.
Theres good news for the parent who missed out.
Parents who wrongly received the benefits had the option to unenroll from receiving monthly payments by using the Child Tax Credit Update Portal at IRS.gov.
Custody And Stimulus Credits Going Forward
Based on the previous stimulus check rules, it is likely that if any further stimulus payments are issued to the American people that the IRS will continue issuing dependent stimulus credits based on a parents eligibility to claim their child as a dependent for tax purposes. Generally, a custodial parent with majority custody rights should expect to receive stimulus credits for their dependents going forward.
When it comes to the noncustodial parents stimulus check, they may not have any requirement to send their childs custodial parent any or all of their check. Still, it is worth considering a personal arrangement with the childs custodial parent if it will serve their best interests. The pandemic has affected everyone in America, including children. Many children have been unable to go to school and spend time with friends, and others have dealt with troubles at home due to the severe economic strain the pandemic has caused for their parents. If you are a noncustodial parent, remitting some amount of your stimulus check toward helping your child is a reasonable and compassionate choice, but a personal one.
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How To Handle Financial Disputes With Your Co
Child support is an inherently contentious issue. The economic strain caused by the pandemic and subsequent lockdowns is an unprecedented matter that will likely influence the economy and American family dynamics for years to come. Ultimately, no matter what financial measures the government takes regarding child stimulus credits and dependent tax benefits, you have a responsibility to do what is best for your child.
Many parents who share custody have roughly equivalent custody rights, and determining which parent has the right to claim their child as a dependent for tax purposes has been an issue for many parents for years. The new influx of issues caused by the coronavirus pandemic has exacerbated these problems, spurring many divorced and unmarried parents to make personal arrangements regarding stimulus payments and adjustments to their custody and support orders. If you have concerns about your current child support order in this new reality, it is best to consult an attorney about possible changes you can make if you find it challenging to communicate with your co-parent.
How To Handle The Stimulus Check For Child In Divorce/custody Cases
Every person who has a child will be receiving $500 per child from the federal government. This is based upon your 2019 tax return, if filed, or your 2018 tax return, if you have not yet filed your 2019 taxes. However, as I understand it, this check will go to the parent who claimed the child. Who claims the child or children is often alternated in divorce or custody decrees, so whomever last claimed the child will receive the check.
So how should these funds be divided?
The honest answer is I dont know and we have no legal authority on this as this is unprecedented. I have not yet had a judge make a decision on this issue. As soon as I do, I will be sure to provide an update.
But here is my two cents as a family law attorney:
If you share joint custody, regardless of who claims the child, the total amount received should be split. This is regardless of if a parent pays child support. You both have the right to equally receive the benefit.
So in sum, the amount should be split, and if one parent owes child support arrears, their half should go to the arrears.
Now a third scenario, what if you are still married but in the middle of a divorce and not living together, what do you do with that money? You are married until divorced in the state of Nevada, and this is community money, so there is no question in my mind this money should be equally split between the parties.
Again, this is based upon opinion and not law, as we have no law on this. What are your thoughts?
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I Am A Parent That Splits Custody Of A Child Am I Eligible For A Covid
According to NBC News, parents that split custody for their child or children, may be surprised to find out that if they switch off years claiming children on their tax returns they will not be eligible for the check. The Federal government allows parents to receive an extra $500 payment for each child under the age of 17.
However, If a former spouse claimed a dependent for the 2019 tax season, then the ex-spouse that did not claim that dependent will be ineligible for the $500 check.
If you have questions it is best to consult with the professionals. A family law attorney or tax professional in your area can shed some additional light on the unique circumstances of your case.
How Else Could The Next Stimulus Check Change The Rules About Dependents
In addition to opening up the definition of a dependent to all ages, Bidens $1,400 stimulus check proposal also seeks to include all mixed-status families. This could potentially mean that families with noncitizen parents but citizen children would be eligible for stimulus money.
The second check made it possible for families with one citizen parent to receive a payment, and the first stimulus check blocked all families with one noncitizen spouse if they filed jointly, even if they claimed a US citizen dependent. The same restriction applied to a noncitizen head of household who claimed a US citizen child as part of the previous tax return.
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Stimulus And Split Custody
We alternate years on claiming my son and step daughter. We received the stimulus for my step daughter as we claimed her 2019. We are not claiming her this year but we are claiming my son. When I go to the recovery rebate credit it says we received the correct amount even though I never received it for my son. Can someone explain please?
What To Do About Child Tax Credits Leading Into The 2021 Tax Season
If possible, parents should negotiate disputes over child tax credits out of court. In most cases, the amounts are small enough that hiring an attorney to go to court over just that issue wont make sense. However, if you have a pending divorce, or are going to court over custody, parenting time, visitation, or child support issues, you can ask the judge to resolve who should receive your child tax credit at the same time.
Once you and your co-parent decide who should receive the payments, you both can visit the Child Tax Credit Update Portal to opt in or opt out of receiving the advance payments. If you believe you have received payments in error, you should deposit them into a savings account and hold onto them until you have resolved the issue with your former spouse or through the court. There is a chance the IRS will demand overpayments back when you file your 2021 tax return, or that the court will order you to pay those funds to your co-parent. If you have already spent them, that could create even more trouble.
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Which Parent Receives Monthly Child Tax Credit Payments Depends On Your Most Recent Tax Return Plus Some Parents Who Are Receiving Payments Should Opt
Parents who share custody of their children have lots of questions about the monthly child tax credit payments being sent by the IRS from July to December this year. Which parent should be getting the payments? Should the parent who is getting them opt-out of the child tax credit payments? Does the parent who isn’t getting payments lose out on the child tax credit? Confusion surrounding these types of issues can add unnecessary frustration for parents trying to figure out how the monthly payments work.
Fortunately, the IRS has provided much-needed guidance for parents with shared custody arrangements. For instance, the tax agency describes how it determines which parent should receive the monthly payments. It also advises some parents who are currently receiving payments to opt-out or risk having to pay the money back. And the IRS explains how qualifying parents who aren’t receiving monthly payments can eventually claim their money. This information should clear up some of the uncertainty divorced, separated, or unwed parents have about the 2021 child tax credit payments.
How Much Will Families With Dependents Receive For Their Stimulus Checks
Stimulus checks from the $1.9 trillion American Rescue Plan Act of 2021 are hitting the nations bank accounts. The amount varies, but if you had income below certain levels $75,000 for individuals, $112,500 for heads of household and $150,000 for couples filing jointly you would receive $1,400 per person as a direct deposit or mailed check. Theres also an additional $1,400 for each dependent claimed on the most recent tax filings.
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Speak With A Colorado Divorce Attorney Today
Divorce is a difficult and emotionally stressful situation to go through under normal circumstances, and it can be even harder during uncertain economic times like this. The family law attorneys at Halligan LLC can help you navigate the complexities of Colorado family law and will work tirelessly to reach the best possible resolution for you and your family. Call us at 608-2361 or fill out our contact form today to schedule a confidential consultation.
Additional Resources
The Child Tax Credit Could Be The Stimulus Check Divorce Parents Hate
As the IRS begins the early stages of the payment rollout, some parents who share custody of a child are left to wonder whether they each will receive a full child tax credit check.
Thanks to the Internal Revenue Service, millions of eligible Americans have already seen their $1,400 coronavirusstimulus checks under the American Rescue Plan land in their respective bank accounts.
But there is no question that many are still struggling amid the ongoing pandemicand perhaps the most vulnerable right now are low-income American parents with multiple children. Come July 15, however, there will indeed be help on the way for these individuals via the new child tax credits. According to the White House, nearly forty million American families are expected to benefit from these funds.
Know that this newest cash windfall will make eligible parents qualify for $3,600 per year for a child under the age of six and up to $3,000 for children ages between six and seventeen. This all means that for a family headed by a couple earning less than $150,000or an individual making under $75,000they can now collect $250 or $300 payment each month through the end of the year.
As the IRS, however, begins the early stages of the payment rollout, some parents who share custody of a child are left to wonder whether they each will receive a full child tax credit check.
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If I Received The Other Partys Stimulus Payment Do I Have To Forward It To Them
If you filed a joint return in 2018 or 2019 but later got divorced, the money from the stimulus should ideally be split equallyeach individual should receive $1,200 of the total $2,400 payment. The CARES Act refers to the payment as an amount given to an individual. If you are separated and the full amount of $2,400 was deposited into your account, half of that amount technically belongs to the other party, and it may not be legal for you to keep the money. If the other party has the payment and will not release it to you, you may wish to speak to your lawyer about the best way to recover it. You may wish to contact a CPA for specific advice about the law regarding tax refunds.
I Am Receiving The Child Tax Credit Advanced Payments But My Child Does Not Live With Me In 2021 What Do I Do
If you claimed your child on a 2019 or 2020 tax return, the IRS may have automatically issued you advance CTC payments.
- Use the Child Tax Credit Update Portal to opt-out of advance payments. Your future advance payments will be stopped. If you are receiving payments for multiple children, later this year, you will be able to remove a child from your Child Tax Credit information and continue to get payments for other children in your household.
- If you havent filed a 2020 tax return, you can do so to provide the IRS with more current information about your family situation. Your future advance payments will be stopped after your 2020 return is processed. Note that the IRS still has a backlog of tax returns to process, so you may experience delays. If you choose this option, your advance payments will not be stopped until the IRS has processed your 2020 tax return. Using CTC UP to opt-out may be a better option to stop your advance payments sooner. You can use CTC UP and still file your 2020 tax return, which may be worth the potential wait if youre eligible for other tax credits .
- Continue receiving CTC advance payments ifyour childs other parent agrees to allow you to claim your child on your 2021 tax return . They will need to sign and give you Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. You will attach Form 8332 to your 2021 tax return to claim the other half of the CTC.
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Stimulus Check Dependents: 2 Possible Changes For A Third Check And Who They Could Benefit
Child dependents for stimulus checks and for taxes arent always the same thing. Heres how it works.
With the first and second stimulus checks, many families were disappointed to learn that not all dependents were eligible for a payment even if they were listed as dependents on your taxes. The reason was a rule governing the first two checks that said no people over the age of 16 who are supported by their family would count toward the household total. That meant older teens, college students, older adults, and older or adult children with disabilities that preclude independent living were all left out. A future third stimulus check could change this situation in a big way, however.
President Joe Bidens $1.9 trillion stimulus package proposal includes two ways families with dependents may get more stimulus money, when and if a new stimulus payment happens. There may actually be multiple ways dependents could bring more money in a third payment. Congress needs to agree on a new bill, and the total amount your family could receive may depend heavily on the outcome of a current debate to make the third check more targeted.
Well go over the new details and bring you up to speed on the stimulus check qualifications for your family including how to receive any missing stimulus money when you file your federal taxes this year, and who the IRS counts as an adult for stimulus checks. This story was recently updated with new information.
Recently Divorced Couples More At Risk
Since stimulus checks get deposited into the bank account associated with someone’s federal tax filings, couples that are divorced but jointly filed taxes as a married couple may run into issues over how they split the single deposit, said John Floreancig, general counsel at Indianapolis Legal Aid Society.
“Because if you’re filing your own taxes, you’re going to get your own stimulus check,” Floreancig said.
If a married couple going through divorce finds themselves at odds over who gets what amount from stimulus payments, they can ask a judge to decide on the issue as part of the divorce proceedings.
“So as long as the decree hasn’t been issued, they could certainly agree on how to split or who gets it. Or it could be a litigated issue at a final divorce hearing,” Floreancig said.
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