An overpayment of the tax credit is an amount owed by paying you more tax credits than you were entitled to. Tax credit overpayments are due to HM Revenue & Custom (HMRC) and collected by HM Revenue & Custom (HMRC). A creditor needs proof that you are unable to repay their debts. This will help if you actually stop the payment when you file your expungement application, rather than giving up basic things so you can offer the creditor a token payment. Low-income people get a good deal. If your amended AGI for 2021 does not exceed $40,000 (sole applicant), $50,000 (head of household) or $60,000 (joint filer) and your principal residence was in the United States for more than half of 2021, you will not have to repay an overpayment amount. This is a victory for you! HMRC may transfer the debt to the Department for Work and Pensions (DWP) for collection. When this happens, the debt can be recovered as if it were a Universal Credit overpayment. For more information, see the „Collection“ section of the Universal Credit Overpayment Fact Sheet.

Normally, you have three months to do this. HMRC may continue to recover overpaid tax credits while they review your dispute. You can file a complaint on GOV.UK or call the tax credit helpline. They will try to resolve your complaint as soon as possible. If you claim the child tax credit for fewer children in 2021 than in 2020, it can also result in an overpayment. This may be the case, for example, if you are divorced and you reported that your child was dependent on your 2020 tax return, but your former spouse reported that the child was dependent for 2021 (a common arrangement). In this case, the IRS probably sent you monthly payments for the child. However, since you are not eligible for the child tax credit when you return in 2021 (your ex will live), all the money you received from July to December is an overpayment. Use the sample letter Write a debt to apply for expungement. Keep a copy of the letters you send and any responses you receive from your creditors. When they respond, it is very important that you keep written confirmation from the creditor that they have written off your debts as proof that you no longer have debts. Written proof that the creditor has written off the debt may also be useful in the future if another creditor claims to have purchased the debt and asks you to pay it.

Your letter from the original creditor can convince the new creditor that you are no longer in debt. Here`s an example of how it works: Joe, who is single, claimed a child tax credit for two children (children are 2 and 4 years old at the end of 2021) on his 2020 tax return. As a result, the IRS sent him $3,600 in monthly payments in 2021. However, Joe can`t claim the child tax credit on his 2021 return because his ex-wife is claiming the children as dependents on their return. Since his child tax credit is $0 in 2021, the entire $3,600 he received from the IRS is an overpayment. Joe`s initial reimbursement coverage is $4,000 (i.e. $2,000 for each child). If Joe submits a 2021 return with a modified AGI of $60,000, his amended AGI will exceed the lower limit of the applicable income range – $40,000 – by 50% ($60,000 – $40,000 / $80,000 – $40,000 = $0.5). As a result, Joe`s refund protection will be reduced by 50%, from $4,000 to $2,000. Therefore, Joe only has to repay $1,600 of his $3,600 overpayment ($3,600 – $2,000 = $1,600). The money you still owe to your mortgage or secured lender in this situation is called a mortgage deficit.

Sometimes it can be large quantities. Nevertheless, you can consider a depreciation request if your situation requires it. See the „Ask your lender not to keep track of their debts“ section of our mortgage deficit fact sheet. This includes asking your mortgage lender to write off your standard letter of debt, which you can use to apply. If you prefer to let them know by phone, you can call the HMRC Tax Credit helpline to explain why you can`t pay off the debt. If you have a physical illness, you can ask your doctor to write a letter to your creditors explaining your situation and how writing off their debts would help. As with any expungement, you must convince the creditor that your situation means that partial cancellation is in their interest and yours. Offer at least the monthly payment the creditor is likely to receive when they apply for a court order and begin payments. If you are unsure of the likely amount of this amount, contact us for advice. Explain that you will offer the payment for a certain period of time and use a period of three to five years. Ask them to suspend interest and fees during the repayment period.

Tell the creditor that if they accept your offer, they will receive more than if you had to choose an option like bankruptcy. For information on bankruptcy and other debt options available to you, please see Ways to pay off your debts later in this fact sheet. HM Revenue and Customs (HMRC) rarely agrees to cancel an overpayment debt with a tax credit. However, in certain circumstances, they may agree to release the person from liability for paying the debt. This is called remission. They may agree to consider forgiveness if the person with debt has mental health issues or is in a desperate situation, or if they are convinced that the person should not be sued to pay the debt. Learn more about HMRC`s approach to recovering overpayments on GOV.Us Tax Credits: What happens if you were overpaid (COP26). HMRC operates a dedicated payment hotline on 0345 302 1429 which you can contact to discuss why HMRC should stop collecting the debt. Contact us for advice on special circumstances HMRC may wish to consider when considering a tax credit. If the recovery rate is causing financial hardship, you should try to negotiate reduced payments.