Stimulus check loophole for child support: Will the IRS let both parents get $1,400 per kid?

For families with children, the new stimulus bill offers a handful of financial benefits, including an expansion to the Child Tax Credit and help with the cost of child care. The just-signed relief legislation, however, may close off a loophole with the first two checks that allowed parents who share custody of a child to each get a payment. We will tell you what we know right now.

The new stimulus bill helps families in other ways too, by offering broader guidelines about which children (and adults)  who are eligible for a third stimulus check of up to $1,400 per person. (Here’s when your check could arrive, and how to track it.) To get an idea of how much you could receive, you can calculate your stimulus check total. 

We’ll help explain the complicated details of child support situations and stimulus checks — including the details revealed in the final bill and what to do if you didn’t get as much as you think you should from the first two checks.

Is the loophole for joint-custody stimulus checks closed for the third payment?

Many parents who aren’t married and share joint custody of their children actually received two payments for the same child during the first round of stimulus checks, if they alternated years claiming those children on their taxes. In other words, if one parent claimed a child in an even year and the other in an odd year, both could recieve checks for that child. That’s because the IRS looked at two different tax years — 2018 and 2019 — to determine eligibility for the first check.

For the second stimulus check, the IRS only looked to 2019 tax returns, but that doesn’t mean the double-dipping loophole was closed entirely. If you’re a parent in a joint-custody scenario like the one above and you typically claim a dependent child in odd-numbered tax years, you may be able to get a duplicate $600 child dependent payment as a tax credit when you file and claim the child on your tax return, similar to what you’d do if you did not receive a second stimulus check despite being eligible for one.

That loophole could be closed off in the new stimulus bill that authorizes the third check. According to Andy Phillips, director at The Tax Institute at H&R Block, parents who aren’t married to each other and who alternate custody of an eligible dependent might not both qualify to receive stimulus money for the same dependent this time around.

Phillips said because of guidelines Congress included in the new law, “it’s possible that if an advance payment is received by one parent for the dependent, no additional payment can be made for the same dependent on the other parent’s return (by claiming the Recovery Rebate Credit).” Phillips said the Treasury Department is expected to issue guidance on this situation.

How is child support connected to the third stimulus check?

With the third check, if you’re past due on child support, you can still receive your full stimulus payment. It won’t be redirected to cover late support payments. This holds true for any past-due federal or state debts: Your third payment is not subject to reduction or offset. However, private debt collectors may be able to redirect your payment to cover a debt.

Also, the IRS can withhold all or part of a stimulus payment if you’re claiming it as Recovery Rebate Credit when you file your taxes. An independent taxpayer advocacy group within the IRS is working with the agency to address this issue.

New dependent guidelines open up eligibility for stimulus money

The third stimulus check makes dependents of all ages count toward the family total, for $1,400 apiece. This time around, a qualifying dependent is anyone you claim on your taxes, including a qualifying child younger than 19 years old, a student younger than 24 years old or a qualifying relative who relies on you for care.

What to know about the Child Tax Credit

The Child Tax Credit will distribute payments of up to $3,600 per child to tax holders who qualify for the income threshold. According to CNBC, parents of dependent children may be able to use the same even/odd tax filing method to both receive payments. The US Treasury and IRS have not yet offered guidance on how they will administer advanced payments to parents in split custody arrangements, CNBC said.

How other eligibility adjustments affect your stimulus check

The new stimulus payment is “targeted,” which means that fewer people qualify overall. The checks come with a sharp income cutoff, so that if you make above a certain amount — say, $120,000 as a head of household — you wouldn’t be eligible for any stimulus check money, even if you have multiple dependents. The date you file your taxes, and when the IRS processes that payment, could also play a significant role in whether or not you’d receive a full or partial payment, or maybe none.

For more stimulus check details, here’s everything to know about third stimulus check for up to $1,400 per person and how to track your stimulus check money.

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