Further to perplexing advice about the Advanced Child Tax Credit published last week by the IRS, Democrats Abroad has written to the Treasury Secretary and IRS Commissioner seeking clarification about eligibility for the expanded Child Tax Credit established by Congress in the American Rescue Plan Act. Some believe the advice indicates that American parents abroad have been deemed ineligible, but the language is not clear. Read our letter here. Watch the DemsAbroad Child Tax Credit Webinar here.
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Around May 15, 2021 the IRS published this advice on its website on the expanded Child Tax Credit enacted in the American Rescue Plan (“ARP”) Act of 2021 (P.L. 117-2):
For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.
The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.
Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).
Democrats Abroad has consulted tax return preparers servicing non-resident Americans and found disagreement on whether the U.S.-residency eligibility criterion (in bold above) relates solely to the advance payments or to the enhanced payments overall. There is also some confusion about whether the residency requirement relates to 2020 or 2021. If tax advisors who specialize in tax filings for non-resident citizens are uncertain then American parents abroad preparing their own filings certainly will be.
We have raised this matter directly with our friends on Capitol Hill as well. We need to know why Americans abroad were cut out of the ARP Act CTC provisions.
We expect to hear back from the Treasury Department either directly or through the Congressional Liaison to the IRS on the matter raised in our letter and accompanying addendum and will share what we learn.
DEMSABROAD CHILD TAX CREDIT WEBINAR
On May 20, 2021 Democrats Abroad hosted a Webinar on the child tax credit. You can watch it on the DemsAbroad YouTube channel. The webinar also includes advice on registering your child's birth abroad and obtaining a SSN for your child (essential for claiming the CTC on your tax filing).
DEMOCRATS ABROAD TAXATION TASK FORCE