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August 26, 2021

NTA Blog: Advance Child Tax Credit: What You Should Know: Part II

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Part I of this series addressed ten things that individuals should know about the Advance Child Tax Credit (AdvCTC), including qualification, reasons someone might want to unenroll from receiving monthly payments, and first-time parents. Part II will focus on issues experienced by taxpayers with Individual Taxpayer Identification Numbers (ITINs) and the issuance of paper checks versus direct deposits for the August payment. Part III will explain how AdvCTC tools work, including ID.me, and will discuss the struggles some taxpayers are facing in receiving their AdvCTC.

Taxpayers With Individual Taxpayer Identification Numbers

Over one million taxpayers who filed their returns with an ITIN did not receive their Child Tax Credit (CTC) monthly payment in July. The IRS has identified the issue, which it fixed prior to issuing the August payments; the issue is not anticipated to occur again.

But the fix comes with confusion. Since the IRS erroneously did not make the July payment, it calculated the August payment based upon the total amount of eligible AdvCTC and then divided it by five months (August-December). Good news: as of August 23, the IRS is retroactively issuing the July payment to these individuals. However, the July payment amount will be based upon the total amount of eligible AdvCTC divided by six months (July-December) and then reduced by the additional amount included in the August payment. So, the July payment will be slightly less than the August payment. The September payment should reflect the correct amount of AdvCTC, but the dollar amount will be inconsistent with the July and August payment. Are you confused yet?

To make these individuals whole, the IRS is currently issuing their missed July payment. In the span of a month, however, these taxpayers will receive three payments (mid-August for August, late August for July, and mid-September for September). And yes, it will be for three different amounts, which will generate confusion and questions.

I will try to simplify by way of an example: Mary has one child and based upon her 2020 income may have a CTC credit of $3,000. One half of that amount, $1,500, would be eligible to be paid in six monthly payments ($250) as AdvCTC. If Mary filed her 2020 return with an ITIN and did not receive her July payment the IRS calculated her August payment based upon a five-month schedule (August-December) and paid Mary $300 in August ($1,500 divided by five payments). Now that the IRS is retroactively paying Mary her July payment, she will be receiving $250 for the July payment based upon a six-month schedule (July-December, $1,500 divided by six payments) minus the additional $50 she received in August. Her July payment will be $200. Now to add to Mary’s confusion, the IRS will be issuing the September payment in the correct amount of $250. All subsequent payments should be $250.

The good news: By mid-September, Mary should receive a total of $750, which is the correct amount she would have received had the IRS not made the error in July. Mary is made whole.

The bad news: Mary will have no idea why she received three different payment amounts, and we need your help getting this information to Mary.

Although, the IRS will be sending out notices informing taxpayers of the adjustments, our concern is Mary will not receive the notice before receiving the inconsistent payments. Mary will not comprehend why she received $300, $200, and then $250 all within a month of each other. This will leave Mary confused and most likely reaching for the phone only to be placed on hold, not have her call answered due to the challenges the IRS is facing with its low level of phone service, or not able to get a detailed explanation of the discrepancies. My plea for the readers of this blog post is to please get the word out to the Marys across the United States so that she will understand what happened and the reasons why the amounts differ and that she has received the correct amount based upon her prior filed return and does not have to reach for the phone.

Check Your Mailbox: Over Four Million Individuals Did Not Receive Their Advance Child Tax Credit via Direct Deposit

On August 13, 2021, Treasury issued a press release about a separate issue affecting the method of AdvCTC August payments. Due to a technical issue, which the IRS expects to be resolved by the September payments, 15 percent of recipients who received payments by direct deposit in July will be mailed paper checks for the August payment. If you have not received your August payment, you can check CTC UP to determine if you received a direct deposit or paper check. If a paper check was issued, you can anticipate some delay.

Difficulties Reaching the Child Tax Credit Toll-Free Line

Taxpayers are also struggling to contact the IRS when they run into problems. In June, the IRS sent Letter 6416 to potentially eligible taxpayers informing them of the upcoming AdvCTC payments and estimating how much CTC they could receive. The letter included a dedicated phone line to call, 800-908-4184, which is staffed by contractors and is limited to general questions. Any account-related inquiries are referred to an IRS customer service representative. Unfortunately, the ability to reach an employee by phone remains very limited. The cumulative level of service (LOS) for the dedicated AdvCTC line, which started on June 6, is 39.4 percent. The LOS on the Form 1040 line was less than 20 percent throughout this time period from June 6 to August 14. In addition, Letter 6416 did not include a centralized mailing address for taxpayers who want to unenroll or return payments received, and did not provide a paper unenrollment form. The IRS anticipates it will have a paper unenrollment form available soon, but in the meantime, individuals continue to receive payments pursuant to the legislation until they notify the IRS of their desire to unenroll. Taxpayers can try calling the dedicated phone line, noted above, or make an appointment with a local Taxpayer Assistance Center to unenroll.

Conclusion

In hard times, we tend to focus on the challenges and difficulties we all experience. While this blog discusses taxpayers facing some of these challenges and provides information to understand the cause of the delay and manage expectations, it should not go unrecognized that the majority of families across the country timely received the first two AdvCTC payments without any issues. Tens of millions of American families successfully received their AdvCTC payment for the month of July and August, and payments are expected to continue through December. Although it may not be necessary for Americans to understand the difficulty of the task or the efforts necessary to quickly implement the legislation, it is, however, important to appreciate the efforts made by the IRS employees. I want to thank our IRS employees for once again stepping up and demonstrating their dedication to the public. The efforts of our IT team, IRS employees across the board, and our leadership should be recognized and applauded. Some outside professionals were weary of the IRS’s ability to timely accomplish this mission, but Congress entrusted the IRS employees with this important mission and its leaders and employees made good on that mission, albeit with a few bumps. As each month goes by, the IRS is adding additional functionality to CTC UP, which will provide added benefits for our citizens and improve the CTC UP tool.

Read the past NTA Blogs

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

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