How to return an improper advance child tax credit payment

July 27, 2021

Thomson Reuters

In correspondence that IRS sent to Checkpoint, IRS has provided instructions for returning advance child tax credit payments (CTCs) that the recipient didn't qualify for or, for other reasons, wishes to return.

Background. Taxpayers are allowed a CTC—temporarily expanded and made refundable for 2021 by the American Rescue Plan Act (ARPA, PL 117-2)—for each qualifying child. (Code Sec. 24)

In accordance with Code Sec. 7527A, IRS has established a program to make periodic advance payments which in total equal 50% of IRS's estimate of the eligible taxpayer's 2021 CTCs, during the period July 2021 through December 2021. See IRS provides information about advance child tax credit payments.

How to return an advance payment. Because (1) IRS determines who qualifies for the advance payments based on taxpayers' 2020 (or, in some cases, 2019) tax return, (2) the 2021 CTC itself is based on taxpayers' 2021 situation, and (3) a given taxpayer's 2021 situation will in some cases be different than their 2020 or 2019 situation, some taxpayers who don't qualify for the 2021 CTC will get 2021 advance payments.

IRS has notified Checkpoint about how taxpayers who receive an advance child tax credit that they didn't qualify for or, for other reasons, wish to return the payment, should make those returns. IRS says that the same procedures apply for returning these advance payments as applied to the return of the Economic Impact Payments that were provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (PL 116-136).

Specifically, IRS refers taxpayers to Economic Impact Payment Information Center — Topic I: Returning the Economic Impact Payment, which says:

If the payment was a paper check:

1. Write 'Void' in the endorsement section on the back of the check.

2. Mail the voided Treasury check immediately to the appropriate IRS location.

3. Don't staple, bend, or paper clip the check.

4. Include a brief explanation stating the reason for returning the check.

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:

1. Submit a personal check, money order, etc., immediately to the appropriate IRS location.

2. Write on the check/money order made payable to 'U.S. Treasury' and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.

3. Include a brief explanation of the reason for returning the EIP.

IRS also refers taxpayers to the abovementioned Economic Impact Payment Information Center webpage for a list, by taxpayer's state of residence, of where to mail returned paper checks.

Observation. Presumably, the only change that an advance CTC returner needs to make to the above instructions is to write '2021 advance CTC,' instead of '2020EIP' on any personal check that the taxpayer submits to IRS.

Reference: For advance payments of the 2021 CTC, see FTC 2d/FIN ¶A-4062.