Dividing the Biden Child Tax Credit During Your Divorce
If you’ve been following the national news then you will have heard that the Child Tax Credit (CTC), a policy that has existed since 1997, was recently expanded with the enactment of President Biden’s American Rescue Plan, going from $2,000 per child per year (in the past) to now $3,000 for children ages 6 through 17, and $3,600 for children under 6. The vast majority of American parents — covering 39 million households, or 88 percent of households with children, per the Treasury Department — will now receive monthly payments automatically.
The credit starts phasing out at $75,000 for individuals, $112,500 annual gross income for most single parents (typically those who file as head of household) and $150,000 for most married parents; the maximum income to receive some credit depends on the number of children in a household, but a married couple with two kids won’t see the credit go away until they reach $480,000 in income.
Six months of payments will be advanced on a monthly basis through the end of the year. This means eligible families will receive $300 monthly for each child under 6 and $250 per child older than that. These payments are expected to be sent out on the 15th of each month commencing July 2021.
You’ll get it automatically if you filed a 2019 or 2020 tax return (if you got stimulus checks for your kids last year and this spring, you’re good); if you didn’t file those years, or if you have a kid who was born after you filed, the IRS has set up a site to help you sign up. The nonprofit website GetYourRefund.com can also be helpful and can connect you with an IRS-certified volunteer to help you get your money. Also you can start the process of signing up if you didn’t file taxes in 2019 or 2020 on the IRS website.
However, if you are currently going through a Divorce, or have recently gone through a divorce (since the last time you filed taxes), then these new Child Tax Credits could cause problems.
Similar to the Federal Stimulus funds that went out last year, these new payments again appear as though they will be paid out in the form of direct deposits to the bank accounts on file as of your 2020 tax returns, or checks mailed to the residence of record on your 2020 tax return.
This may be a problem for you if you are no longer living at the ‘residence of record’ that the IRS has on file for you from your 2020 tax filing, or if you no longer have access to the IRS 2020 bank account of record, thus preventing the funds from being received by you, as the Spouse whom you are currently Divorcing (or recently divorced) may be the one to receive the check or direct deposit. In these situations, Court intervention to ensure the proper division of these funds may be needed.
The best advice for someone currently getting divorced is to contact your attorney right away so they can put the other side and the Court on notice of these coming government payments and ensure that they are divided. In most cases, regardless of how much Parenting Time either parent is exercising, so long as Child Support payments are up to date, then the Court will divide any Child tax credit funds in half (50/50).
It is important to address this issue now, as these Child Tax payments have begun going out and will continue to go out on a monthly basis for the rest of the calendar year, so orders to divide or share the funds will need to go into effect sooner rather than later. If your divorce has already been finalized and the case closed, dividing these funds could prove difficult. You will need to contact a family law attorney to discuss your options. If you are fortunate enough to be the one to receive the deposits or checks and not your Ex (or soon to be Ex), don’t think you can cash it without saying anything and get away with it, as some checks from the government to joint tax filers have the names of both spouses on the check and often require both parties to endorse or sign it before depositing.
While this may seem like an annoying hassle to deal with on top of the myriad issues already having to be dealt with in your divorce, the amount of funds being sent out are not insubstantial and worth addressing in your case, as attempting to address the issue through the IRS directly is not likely to bear fruit. Only an order from your Family Court Divorce case Judge will likely have the necessary authority to divide these funds. So act now and don’t wait. Contact your lawyer right away and start the process of dividing these monthly federal tax credit stimulus payments before the funds get misappropriated by your Ex without your knowledge or consent.