Major win for my client, who through ridiculous IRS procedures and flawed tax law ended up with a $10k IRS bill.

Major win for my client, who through ridiculous IRS procedures and flawed tax law ended up with a $10k IRS bill. 

This is a real precedent for relief for expats who received 2021 monthly Enhanced advance child tax credit payments (Advance EACTC) and were forced to repay them. 

Here's the story:

During 2021, the IRS distributed monthly advance child tax credit payments, which were largely increased amounts but were only allowed for those who resided in the US for 6 months of 2021.

Expats who had used a US mailing address on their 2020 tax return received these payments automatically. 

When they filed their 2021 tax returns, they had to reconcile the payments already received, and many ended up owing the IRS repayment amounts (basically the same as owing tax). 

This client had an accountant file their return, but he forgot to ask them how much Advance EACTC payments they had received. He checked the box "resided outside the US for 6 months of the year". The return seemed to show a refund due. 

To their shock, they received a bill for over $10k including penalties!

They had no idea that these amounts had to be repaid, and even worse, this low income family had already spent the funds on basic expenses, and didn't have the wherewithal to pay their bill. 

Here is the solution I proposed:

The Advance EACTC included a "safe harbor" repayment protection for those that received payments in error, provided that they were low income. 

However, the safe harbor technically only applied in the case of "a change in the amount of qualifying children" but not for expats who just plain received the payments in error. 

We filed an amended tax return without claiming any of the children as dependents, and requesting that the IRS remove the amount owed as a result. 

Since according to law parents are not required to claim any children as dependents, this was a viable solution.

After 18 months of processing, guess what? The IRS finished processing, but no adjustment to the amount owed. 

After calling multiple times, and sending a final letter, the IRS finally agreed to remove the amount owed, and reinstated a 2020 refund which had previously been used to cover part of the amount owed.