How Do I Claim Refundable Credits After Disallowance?

Sometimes a taxpayer’s claim for a refundable tax credit is reduced or denied. If the IRS rejected or reduced your claim for certain refundable tax credits, you will need to complete and submit the Form 8862 along with your tax return in order to claim any of these credits again. 

Typically, you are required to include the Form 4868 in the first filing you after a disallowance. Then, if the IRS accepts your return and allows you to claim the credit that was previously disallowed, you do not need to file this form in subsequent years unless the IRS disallows a future claim and/or tells you to file it again.

The credits subject to this type of disallowance and that may require you to file Form 8862 are:

  • Earned Income Credit (EIC)
  • Child Tax Credit (CTC)
  • Additional Child Tax Credit (ACTC)
  • Credit for Other Dependents (ODC)
  • American Opportunity Tax Credit (AOTC)

Important: Making a math error or clerical mistake on your tax return can trigger a reduction or disallowance of these refundable credits. If this is the reason your claim was disallowed, then you do not need to file Form 8862. Also, you do not need to file it if:

  • You filed earlier in the year and your claim was reduced or disallowed only because the IRS determined that a child you reported as your qualifying child for claiming the EIC was not in fact your qualifying child AND
  • You are now claiming the EIC without a qualifying child.

If your claim for one of the specified refundable tax credits was disallowed for any other reason, then you must file this to claim the disallowed credit(s) again.

After you submit the form, if the IRS agrees that you are eligible to claim the previously disallowed credit then you will receive Notice CP74. This notice provides official notice that you are now eligible to claim the credit(s) again. 

If the IRS denies your EIC due to reckless or intentional disregard of the rules, then you cannot claim it again for two years. Do not file a Form 8862 until this amount of time has passed. If the decision to deny your EIC claim was due to fraud, then you must wait 10 years before attempting to claim the EIC again.