Child Tax Credit woes continue

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Not all that surprising to tax professionals, the IRS finally has announced it has sent incorrect notices to many married filing joint couples who received advanced child tax credits.

Both spouses may have received notices for the full amount of the advanced payments received or only one spouse may have received a notice adding confusion as to how that should be listed on the tax return.

To make matters worse, the IRS online payment processing systems seems to be missing a beat on correctly applying actual payments on married filing joint returns as well.

In cases where the spouse may have been the one to make the payment against their social security number, the IRS has inadvertently sent balance due notices instead of applying those payments to joint returns.

What should you do as a practitioner? 

It takes more time but recommend that your client obtain transcripts from the IRS or give you permission to do so. Waiting for transcript copies can help avoid issues down the road.

The transcripts can help answer the child tax credit questions, especially if the letters were received without the correct balances on them. Incorrectly reporting the advanced credit payments has led to numerous refunds being held for significant lengths of time.

The transcripts can also bring to light if there are issues with tax payments being credited. If this is the case, consider filing client returns on paper with copies of proof of payment for the payments you’re claiming on the returns to avoid the generation of notices in the first place.

Unfortunately, paper filing also can delay your clients’ refunds.

It is best to prepare your clients for long delays with either or both issues right now. Let them know that any refunds may take significantly longer to process than in prior years. In most cases, the IRS seems to be sorting out the problems, but to the tune of months, not weeks to reach resolutions.

Helping your clients to have good expectations goes a long way to managing the stress that they would otherwise experience receiving notices that they do not understand.

While we may not be able to solve all the problems quickly, helping to set good expectations for the process can benefit the relationship we have with them in the long-term.

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