In Rev. Proc. 2021-24, the IRS clarified how individuals who are not otherwise required to file 2020 federal income tax returns can claim advance child tax credit (CTC) payments as well as stimulus payments (i.e., third-round economic impact payments, 2020 recovery rebate credit payments, and additional 2020 recovery rebate credit payments).
To process these payments, the IRS needs certain information from these otherwise nonfilers that would ordinarily be provided on their federal tax return. In the revenue procedure, the Service provided two procedures to enable people who would normally be nonfilers to claim these government payments. The first procedure permits them to file simplified returns. The second procedure enables them to file complete returns electronically even if they have zero adjusted gross income (AGI) (something that otherwise might pose difficulty because of, for instance, return processing parameters that do not allow for zero AGI entries).
More about the special procedures
The procedure to file a simplified return is found in Section 4 of Rev. Proc. 2021-24. The process involves filling in only certain lines on a Form 1040, U.S. Individual Income Tax Return (or Form 1040-SR, U.S. Tax Return for Seniors, or Form 1040-NR, U.S. Nonresident Alien Income Tax Return), including basic identifying information and information about dependents. If filing the form on paper, the individual must indicate “Rev. Proc. 2021-24” above the printed material at the top of page one.
The procedure to complete a return electronically if the individual has zero AGI for 2020 is found in Section 5 of the revenue procedure. Individuals may prefer this approach if, for instance, their tax return preparation software does not permit them to file using the simplified procedure. The process involves entering the following information on Form 1040 (or Form 1040-SR or Form 1040-NR), in addition to all other information required on those forms:
- $1 as taxable interest on line 2b of the form;
- $1 as total income on line 9 of the form;
- $1 as AGI on line 11 of the form; and
- $1 as itemized deductions on lines 7 and 8 of Schedule A (Form 1040-NR) and line 12 of Form 1040-NR (Form 1040-NR filers only).
These special procedures for nonfilers to claim advance CTC payments and stimulus payments do not apply to residents of American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, or the U.S. Virgin Islands.
It is important to note that individuals who have already filed a 2020 federal income tax return do not need to file any additional forms or otherwise contact the IRS to receive advance CTC payments for each eligible qualifying child shown on that return (or to claim or receive a stimulus payment).
Likewise, individuals who filed a 2019 federal income tax return do not need to file any additional forms or otherwise contact the IRS to receive an advance CTC payment for the 2020 CTC qualifying children shown on that return (or to claim or receive a stimulus payment). For this purpose, filing a 2019 return includes entering information into the “Non-Filers: Enter Payment Info Here” tool in 2020.
— Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is a Tax Adviser senior editor.