SSN issued in 2022

[katie]

I have a new client (a family) consisting of a Taxpayer and three dependent children ages 17, 4, and 8.

The taxpayer and all three dependents received their SSNs in 2022. 

I filed their 2020 and 2021 Income Tax Returns. Taxpayer had ZERO income to report for both years, but wanted to file tax returns for both years to claim the Recovery Rebate Credit and CTC. No CTC Advanced payments were received.

IRS sent the taxpayer a Notice adjusting the 2021 return.

Original Amount: $9,000 (CTC credit: $3,000 multiplied by three dependent children)

Adjusted Amount: $5,800

How is the IRS calculating $5,800?

Thank you!

[sjrcpa]

Advance payments?

I see you said no.

[TaxGuyBill · Accepted solution]

Were the SSNs issued before the due date of the tax return?

What EXACTLY is the adjusted amount?  Is that the refund?  Or is it ONLY the Child Tax Credit?

On Form 8812, is the box checked for line 13?

$5800 could be $1400 x 2 + $3000

My GUESS is that is the Recovery Rebate for the adult plus one kid, plus the CTC for one kid.  And for some reason the other two kids were disallowed.  Again, that is ONLY a guess. 

[katie]

Were the SSNs issued before the due date of the tax return? No, the SSNs were issued after the due date of the tax return. SSns were issued in 2022.

What EXACTLY is the adjusted amount? IRS Notice reads: Adjusted Refund: $5,800

Is that the refund? Taxpayer had ZERO income...AGI is $0.00. Taxpayer filed return in an attempt to receive recovery rebate credit and CTC.

Or is it ONLY the Child Tax Credit? Yes, it is only the CTC. Form 1040 Line 28 

On is the box checked for line 13? Yes Form 8812,, box 13 is checked. 

When I prepared the tax return the Recovery Rebate was disallowed because the SSNs were issued after the tax return due date. However, the return showed a refund amount of $9,000 for the CTC. 

IRS adjusted the refund amount to $5,800. Client received the $5,800 via direct deposit today. 

IRS is giving us until October 7th to respond if we agree with their changes. I wish they would explain how they came up with the $5,800 amount. 

[TaxGuyBill]

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@katie wrote:

Were the SSNs issued before the due date of the tax return? No, the SSNs were issued after the due date of the tax return. SSns were issued in 2022.

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Just to confirm, you are asking about the 2021 tax return, right?  The due date was April 18th, 2022 (or October 15 if an extension was filed).  So the return SSNs were issued after April 18th, and no extension was filed?

Were all SSNs issued on the same date?

[qbteachmt]

For that youngest child, isn't the CTC $3600? $9k doesn't add up.

[katie]

Client told me that her and her son had SSNs from birth and her two other children received their SSNs in March 2022. Originally, she had told me they ALL received their SSNs in 2022, but she later explained that her and her son's were reissued in 2022. Misunderstanding. Your guess was correct. Thank you!

[TaxGuyBill]

But you still have the problem that she should have received the Child Tax Credit (and Recovery Rebate, if they did not receive it) for ALL of the kids because they get their SSN before the April 15th due date. 

[qbteachmt]

They would not have received anything in 2020 or 2021, since the filings for 2020 and 2021 were done by this person (nothing upon which to base the advance payout for RRC/EIP). There is no indication if the 2021 filing was on time or late, but at the least, there seems to have been someone qualifying in the household for some of the credits and maybe for some of the years or all of the years.

If you want to debate the IRS, you're likely going to have to break it out by taxpayer and dependent by tax year and by available credit(s) to figure out which amount(s) to which they are entitled. The eligibility for EIP 3 is different than for EIP 1 and 2. No one without access to every fact and detail will be able to do this.