On July 25, 2003, the IRS began issuing advance payment checks to about 25 million taxpayers who claimed the Child Tax Credit on their 2002 tax return. Taxpayers who did not claim a Child Tax Credit on their return do not receive an advance payment. The payment is an advance refund of the expanded Child Tax Credit for the 2003 tax year. This credit will increase to a maximum of $1,000 per child from $600. Thus, taxpayers could receive an advance payment of up to $400 for each qualifying child they claimed on their 2002 return.
To help taxpayers, the IRS has these answers to some commonly asked questions.
1. What do I need to do to get an advance payment check?
Nothing at all — the IRS is taking care of everything. We’re using your 2002 tax data to automatically figure whether you’re due an advance payment check and if so, how much it will be. If you’re getting an check, we’ll notify you shortly before we mail it. You won’t need to call or fill out any forms or applications.
2. How do I find out if I’m eligible?
Generally, you’re eligible if you claimed the Child Tax Credit on your 2002 tax return and your qualifying child was born after 1986. The IRS will send you a notice of your advance payment amount a few days before your check is mailed.
3. When will I receive my check?
The Treasury mailed most of the advance payment checks on July 25, August 1 and 8 — around 8 million checks each week. The mailings were scheduled according to the last two digits of the Social Security number that appeared first on the 2002 tax form.
Treasury will continue to mail checks until late December to taxpayers who filed returns after April 15, such as those who requested automatic extensions. If you are one of these filers, do not change your 2002 return or payment amount based on your expectation of receiving an advance payment check. If you are eligible, you will receive your advance payment after the IRS processes your 2002 return.
4. Why is Treasury mailing the check instead of using direct deposit?
People often change bank accounts. While people also move, a mailed check can and will be forwarded to a new address. However, a direct deposit cannot be forwarded if a bank account has been closed.
5. I have moved since filing my 2002 tax return — how will my check reach me?
You should file a change of address notice with the U.S. Postal Service to ensure that your advance payment check may be forwarded to your new address. Without your current address, the check could be returned to the IRS as undeliverable.
6. I have not yet filed my 2002 tax return — can I still qualify for an advance payment?
Yes. You could have an extension to Aug. 15 or, for a good reason, Oct. 15 to file a 2002 tax return. If you claim a Child Tax Credit on your 2002 return, follow the 2002 tax law in figuring the amount. Do not change your return or your tax payment in anticipation of an advance payment. If you are eligible for the advance payment, we will mail your check four to six weeks after we receive your 2002 tax return.
7. My spouse and I have divorced and the advance payment check is made out to both of us — can I cash it?
If the check is made payable to two parties, then both parties must endorse the check on the back. Even if the two parties are now divorced, both must sign the check. The law provides that each spouse is considered to receive half of any advance payment made because of a joint 2002 return.
8. Will I qualify for an advance payment if my qualifying child turns 17 on December 31, 2003?
No. Your qualifying child must have been born after 1986 for you to be eligible for an advance payment.
9. What if I receive an advance payment that’s larger than the Child Tax Credit I am entitled to claim on my 2003 return?
When figuring your 2003 Child Tax Credit, you will subtract your advance payment from the amount you would otherwise claim. If your advance payment was more than this amount, you will not have to repay the difference. The new law bases the advance payment on the credits claimed on the 2002 tax return. Of course, we recognize that your tax situation can change from year to year.
10. Will this advance payment raise my taxes for 2003?
No, it’s part of the tax cut the new law gives you for 2003. Keep the notice the IRS sends you for your tax records. You will need your advance payment amount to figure the Child Tax Credit on your 2003 return.
11. I’m eligible but I didn’t receive my check. What should I do?
If you do not receive an advance payment check, you will still be entitled to up to an additional $400 per qualifying child if you claim the Child Tax Credit on your 2003 tax return. Either way — through the advance payment or through claiming the credit on your return — you will receive the benefit of the credit’s increase from a maximum of $600 to $1,000 per child.
12. If I receive the advance Child Tax Credit payment will I get a smaller refund than last year?
Assuming your income and number of qualifying children remain the same, your 2003 refund shouldn’t be smaller than your 2002 refund because of your advance payment. That’s because the advance payment is the same amount as the increase in the value of the credit. The law simply gives you this increase now, rather than having you wait until next year for a bigger refund. When you figure the Child Tax Credit on your 2003 return, you will subtract the amount of your advance payment check from the $1,000-per-child total, generally leaving you with the same $600-per-child credit that you had in 2002.
13. I'm eligible for an advance Child Tax Credit payment, but I still owe federal income tax from last year. Will my advance payment be reduced because of this?
Like any tax refund, the advance payment may be applied against a taxpayer's past-due federal or state income tax, or nontax federal debt. If the advance payment amount is more than the balance owed, the taxpayer will get a check for the difference. Taxpayers subject to such offsets will receive a letter explaining how the advance payment was applied.
14. When I filed my 2002 return, I failed to list one of my four children as a dependent. As soon as I noticed my mistake, I filed an amended return. I’ve received an advance Child Tax Credit payment for $1,200. Will I receive a separate $400 check for the child I reported on the amended return?
No, the advance payment checks are based on the number of qualifying children on the original return. Additional children claimed on amended returns are not included in the advance payment computation. Nor are dependents who were not checked on line 6 of the return as being qualifying children for the Child Tax Credit. The same is true for dependents that are disallowed during processing but later restored because of additional information provided — for example, a dependent whose social security number is missing or incorrect, but whose correct number is provided by the taxpayer in response to an IRS notice.
In all of these cases, the taxpayer will get the benefit of the increase in the Child Tax Credit on the 2003 tax return. The credit will be up to $1,000 per child, minus any advance payments. For example, you listed only three of your four qualifying children on your original 2002 return and you received an advance payment of $1,200. If all four children are still qualifying for the Child Tax Credit in 2003, you would figure a tentative credit of $4,000, subtract the $1,200 advance payment, and claim a credit of $2,800 on your return.