Accounting for the Advance Child Tax Credit Payments on the 2003 Return
During 2003, the IRS issued checks to about 24 million taxpayers as an advance payment of the increase in the Child Tax Credit from a maximum of $600 to $1,000 per qualifying child. Now, when preparing their 2003 tax returns, taxpayers who received these advance payments must subtract the amount already received when figuring their Child Tax Credit.
Here are answers to some frequently asked questions about this process.
1. How can I find out how much my advance payment was?
Shortly before your payment arrived, you should have received IRS Notice 1319, showing your advance payment amount. If you can’t find your notice, check the “Your 2003 Advance Child Tax Credit” application on this site.
2. Where do I report my advance payment on my 2003 tax return?
You don’t — you simply put your advance payment amount on line 2 of the Child Tax Credit Worksheet that is in the instructions for Forms 1040 and 1040A or in IRS Publication 972, Child Tax Credit. Then complete that worksheet to figure the amount of credit you can claim on your return.
3. My advance payment check was less than the amount shown in my notice — which amount should I use in the worksheet?
Use the amount you find in Notice 1319, on the IRS Web site, or through the IRS help line. If you owed past-due federal taxes or certain non-tax debts, some or all of your advance payment may have been used to pay the past-due amount. But you still got a benefit from this offset — having your debt paid — even if it wasn’t in the form of a check made out to you.
4. My income went up this year and my Child Tax Credit is less than my advance payment — do I have to repay the difference?
No, even if you don’t qualify for any Child Tax Credit at all this year, the law provided that you don’t have to repay any part of your advance payment. If you qualify for the credit, you must reduce the credit by the advance payment amount (before offset), but you don’t reduce it below zero.
5. My wife and I filed jointly last year and received an $800 advance payment. We divorced in 2003. She has custody of our two children and qualifies for the $2,000 maximum Child Tax Credit. Does she subtract the $800 when figuring the credit?
No, the tax law says that when joint filers received an advance payment, each spouse was considered to have received one-half the amount. So she will put $400 on line 2 of her Child Tax Credit Worksheet, reducing her $2,000 credit to $1,600. Although you are not eligible for the credit, you do not have to repay the $400 you received and do not report the $400 on your 2003 return.
6. My ex-spouse and I alternate claiming our children as dependents. I claimed them on my 2002 tax return and received an advance payment check. Will my ex now have to reduce the Child Tax Credit by the advance payment amount I received?
No, a taxpayer subtracts only his or her advance payment amount. In your case, your ex-spouse received no advance payment and may claim up to the full credit amount of $1,000 per child on the 2003 return. Because you aren’t claiming the children, you cannot claim the Child Tax Credit for 2003 and the law says that you don’t have to repay any of the advance payment you received.
7. I qualify for the Child Tax Credit but I did not receive any advance payment — how do I get the benefit of the credit’s 2003 increase?
You will get the benefit of the higher credit amount when you use the worksheet to figure your Child Tax Credit. Because you didn’t receive an advance payment, you will enter “-0-“ on line 2 and continue your calculations from the full $1,000-per-child amount.
8. What will happen if I received an advance payment and claim the full $1,000 per child as a credit on my return?
The IRS is automatically checking all Child Tax Credit claims to verify that taxpayers have factored in their advance payments. The IRS will correct taxpayers’ errors in figuring the credit when it processes the tax returns. Such corrections will reduce and probably delay expected refunds.