The enhanced Child Tax Credit is getting billing as one of the most effective strategies in recent years for combatting child poverty. But a new analysis estimates that as many as 4 million children, many from low-income households, could miss out on the payments.
About 60 million children have already received the first payment, which was issued by the IRS on July 15, according to a new analysis from the left-leaning Center on Budget and Policy Priorities. But because the IRS is relying on tax returns to determine who qualifies for the credit and where to send the money, millions of families who don't typically file taxes could fall through the cracks, the analysis says.
Four million children could miss out on a total of $13 billion in benefits, the CBPP estimates. The enhanced Child Tax Credit expanded the credit's size to up to $3,600 per child, while also paying half of that sum through six monthly checks of up to $300 per child that would run from July through December. Several familiesthat they plan to use the money for basics like child care, school supplies and clothing for their children.
Families that don't file tax returns are likely those who would benefit most from the payments, said Chuck Marr, senior director of federal tax policy at the CBPP. In 2020, most married couples whose incomes were below $24,800, and most single parents with incomes below $18,650, weren't required to file tax returns.
"These are the children who could fall through the cracks," Marr said. "This additional income could be game-changing for them."
In theory, families who don't receive monthly CTC payments this year could claim the entire credit by filing a tax return in 2022. But since many of these very low-income families don't file returns to begin with, they could lose the funds altogether.
The estimate that 4 million children could miss out on the payments stems from a few data sources, including a Treasury Department analysis that reveals there are 2.3 million children covered by health insurance who don't appear on tax returns. That indicates the IRS may not have information for those children and therefore wouldn't send CTC checks to their families.
The CBPP also estimates that 1.6 million children will be born in 2021 who will receive Medicaid coverage, or the health insurance plan for low-income people. Those children won't automatically receive checks this year because they won't appear on any 2019 or 2020 tax returns — since they hadn't been born at that point. Families in these cases will need to provide data to the IRS through the Child Tax Credit Update Portal in order to get the payments this year.
IRS needs "to do more"
The IRS has sought to reach out to nonfilers and others who might not know they need to file a tax return or provide data through the Child Tax Credit Update Portal to get payments. But more outreach and funding is needed to reach people who might fall through the cracks, according to Marr and other experts.
The IRS "has been committed, and considering it's a pandemic they have made a good effort, but they need to do more," Marr said.
Community groups, state agencies and other groups that work with low-income families could be included in the agency's efforts to reach these families and help them sign up for the credit, the CBPP said. Already, the IRS is working with some community groups, churches and nonprofits to help families navigate the CTC, but the CBPP notes that state SNAP agencies could be an effective tool for getting even more to sign up.
SNAP, or the Supplemental Nutrition Assistance Program, primarily helps low-income families through providing food stamp benefits. Those agencies could reach out to families who have been on SNAP for more than a year and don't have recent earnings, the CBPP report said.
Already, some families have, but tax experts note that many of these cases involve parents misunderstanding eligibility. For instance, even though 17-year-olds can qualify for the payments, they must still be 17 as of December 31, 2021. If they turn 18 during 2021, they don't qualify.