Child poverty fell dramatically in 2021, thanks to an expansion put in place last year that sent monthly payments of up to $300 per child to millions of eligible families.
Yet many individuals and families eligible for the child tax credit, as well as another called the earned income tax credit, may not have received the money for which they are entitled.
The take-up of the credits tends to be very large, with about 90% of eligible families applying for the child tax credit and 80% of those in line for the earned income tax credit submitting for their refund, former IRS commissioner John Koskinen said during a webcast on Monday.
“That still leaves millions of eligible taxpayer who are not participating in these programs and taking advantage of them,” Koskinen said.
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The panel was hosted by the Bipartisan Policy Center, a Washington, D.C.-based think tank, which also issued a report on ways to improve the take up and administration of those credits.
The child tax credit and earned income tax credit are aimed at helping low- and moderate-income families. Together, they prompt the IRS to issue more than $100 billion in credits and refunds annually, Koskinen said.
The child tax credit was established for the purpose of helping parents pay for their children’s needs. It also serves as an anti-poverty program, according to the Bipartisan Policy Center.
The child tax credit was temporarily expanded in 2021 under the American Rescue Plan Act to provide up to $3,600 for children under age 6 and $3,000 for children under 18. Half of those sums were delivered through monthly payments, while the remaining balance is available to families through their 2021 tax returns.
The earned income tax credit supplements wages for low- to moderate income workers. It was also expanded under the American Rescue Plan. In particular, it raised income limits; brought the maximum credit for workers without children to about $1,500, up from $560; and made it so workers ages 19 to 24 and 65 and over could qualify. Consequently, almost 11 million workers without children became newly eligible for the credit.
Recent data from the U.S. Census Bureau found the expanded child tax credit helped reduce child poverty by more than 40% between 2020 and 2021.
Obstacles to access
Yet even as the American Rescue Plan provided more generous support through these credits, it did not reach all eligible individuals and families.
The expanded child tax credit covered 65 million eligible children. However, the payments initially missed 6 million children who qualified and remained short of 4 million who were eligible at the end of last year, according to the Bipartisan Policy Center.
About 5 million eligible people fail to claim the earned income tax credit every year, which amounts to about $7 billion in benefits, the think tank’s report found.
Much of the reason why people fail to access the credits comes down to administrative barriers, the Bipartisan Policy Center found. That includes lack of access to user-friendly online tools, misperceptions about what it takes to qualify and claiming complexity.
With its report, the Bipartisan Policy Center recommends a host of potential solutions, including developing an office at the IRS to focus on administering social benefit programs and increasing outreach about the credits.
One key reason eligible people may miss out on the credits is a lack of guidance from the IRS, according to Koskinen, as many worry they could be subject to audits if they do not correctly claim the money.
Fewer than 20% of calls to the federal tax agency are answered, and some estimates show just 11% of calls were answered last year, he said.
“If you’re a low-income taxpayer, a little concerned about whether you’re doing this right and you want to call somebody to get help, the last couple of years it’s been impossible to get somebody at the IRS,” Koskinen said.
Now that new legislation will give the IRS $80 billion to make improvements, they will hire more employees to answer the phones.
“I think that will help,” Koskinen said.
Another barrier to claiming tax credits for those who are eligible is finding credible tax preparers who are well versed in the rules of claiming the credits.
Outreach programs are currently working to help people claim the expanded credits for 2021.
It’s not too late to claim
“The No. 1 message is it’s not too late,” said Roxy Caines, campaign director at Get It Back, an organization dedicated to helping people access free filing tax assistance and claim tax credits.
A website called GetCTC.org, which is provided by Code for America, provides a simple form through which people who do not typically file tax returns can claim their child tax credits and stimulus payments. The online form is available through Nov. 15.
“It will only take about 15 minutes for most families to go through and use it,” said Gabriel Zucker, associate policy director for tax benefits at Code for America.
A separate website also provided by Code for America, GetYourRefund.org, lets people file taxes for multiple years through Oct. 1. In addition, free tax preparation services are available through the IRS’ Volunteer Income Tax Assistance Program and Tax Counseling for the Elderly programs. An online locator tool can help people identify free help near them through those IRS services.
Of note, people must meet certain income and other requirements to qualify for those services.
To be sure, while the tools have deadlines for this year, those who are eligible can continue to claim the credits for up to three years.
“If there’s any doubt or question in someone’s mind, they should check it out because they could still be eligible and have this money available,” Caines said.