Child Tax Credits were Expanded to the Poorest Families for the First Time. Most of them Still Can’t Get the Money

Originally published by The 19th

The promise from the Biden administration is big: One policy change would slash child poverty in half.

But months after a historic expansion of the child tax credit, it’s clear that delivering on that assurance is going to demand a complex, multi-agency effort quite unlike anything the federal government has done before. How successful that effort is could make a mark on Biden’s legacy.

To get there, the administration has to devise a plan to reach the nation’s lowest wage earners, who qualify for the money for the first time. It has to reach the people who don’t pay income taxes and aren’t known to the Internal Revenue Service. It has to reach communities that don’t have permanent addresses or contact information. It has to reach undocumented folks whose children now qualify for the money. The expansion, passed in March as part of the president’s first coronavirus stimulus package, is only in place for a year, but Democrats and the president support making the change permanent.

The expansion of the credit signals the first time the United States has attempted to curb child poverty through enhanced direct payments made widely available to almost all families with children. A study by the Center on Poverty and Social Policy at Columbia University found that, if successful, the policy could cut the child poverty rate from 13.6 percent to 7.5 percent — a 45-percent reduction. 

The expansion in March did three key things: First, it increased how much families got for each child — $3,600 per child under the age of 6 and $3,000 per child ages 6 to 17. Second, it made the credit available to the lowest wage families — those who don’t pay income taxes, who had been shut out of the full amount of decades. And third, it made the money available monthly instead of annually. 

Those monthly checks — $300 to $250 per child, depending on age — will be able to reach 88 percent of eligible families, the White House estimates. Families who have filed their taxes already don’t need to do anything — they will get the money automatically.  

The rest, largely those who don’t pay income tax and don’t have a relationship with the IRS, will have to file taxes or sign up through a portal that the agency is setting up next month. (People who don’t typically pay taxes can still file to receive the credit after the May 17 tax filing deadline without facing a penalty).

But many don’t know the expansion happened. Even if they do, information about what they have to do to get it is still scarce. Many lack access to a computer or don’t have the digital literacy to fill out the form and provide the necessary paperwork. Making a mistake is costly — it could bar them from getting the credit for two or 10 years, depending on whether the mistake was careless or intentional. 

The work of finding those people, educating them and helping them through the process is going to fall on hundreds of community organizations who are taking on the task — sometimes as volunteers. And the timeline to do it is short: The first monthly checks under the expanded credit will begin rolling out on July 15. 

At a hearing before a House subcommittee last week, Treasury Secretary Janet Yellen called it a “whole-of-government effort.”

“The IRS is working hard with nonprofits, homeless shelters, nonprofits that work with homeless people, low-income people, to increase awareness,” Yellen said. “Other agencies and government are working with us to do that outreach, particularly to those non-filers — a very critical piece of making this an effective program.” 

U.S. Rep. Rosa DeLauro, the Connecticut Democrat who has been championing this expansion of the credit for nearly 20 years, said about 4,000 community partners are working with the federal government to increase awareness, and the IRS keeping several hundred Volunteer Income Tax Assistance, or VITA, programs open in zip codes with a lot of non-filers. Sen. Sherrod Brown of Ohio, a Democrat who has also been a lead supporter of the credit, said he is working with the Treasury Department to ensure they set up FAQs to accompany the new portal. And in Colorado, Democratic Sen. Michael Bennet is working with about 50 state organizations to raise awareness. 

It’ll be those organizations that will have the most direct contact with low-income communities, but the task is “time intensive,” said Jennifer Burdick, a lawyer at Community Legal Services of Philadelphia. Burdick is a social security insurance attorney — not a tax attorney — who is volunteering her time to learn about the credit and educate clients on it. For her legal aid organization, that work consists of hours of filling out paperwork for other people, going to people’s homes to sift through documents and even sending postcards to people who don’t have computers to make them aware of the credit. 

“This will be life changing for a lot of my clients — absolutely life changing,” Burdick said, “However, eligibility does not equal access.”

Even when the portal is up in the next few weeks, accessing it and filing a form is a major barrier that will deter people, she said.

The portal is going to be modeled after another the IRS set up in the past year to help people who don’t file taxes access the stimulus payments in the coronavirus relief packages. That website, known as the Economic Income Payments portal, also has limitations: For instance, it can’t be viewed on a phone (low-income people are much more likely to own a smartphone than a computer). 

Burdick said the process of filing will likely be extensive. A similar process filling out an intake form on behalf of her clients so they can receive tax filing assistance from their local VITA takes her on average nearly two hours — and that’s if the person speaks English and has all the correct documentation on hand. 

“The organizations that typically help with tax filings are amazing, but they have never had to deal with the population we are talking about, and they are not set up for it,” Burdick said. “There is no organization that is well-positioned to do this work.”

The systems in place are also not designed with the nuances necessary to really reach the lowest-paid people. To claim a child, for example, they have to live with you for at least six months out of the year. But many low-income people don’t have stable living arrangements. In other cases, family members or friends claim children on their taxes because the parent doesn’t file. To get that rectified, the parent would have to trigger an audit that could lead to repercussions for the other person. Many don’t want to do that. 

“These are some of the assumptions that are already baked into the tax code that will leave out some of the more vulnerable folks it’s supposed to help,” Burdick said.

DeLauro said the IRS is working to further simplify the portal to help address some of those challenges, though details as to whether a mobile option will be available have not yet been released. 

“I’m going to continue to work to ensure that both the IRS and folks have the resources they need and for the parents to be able to get access to this effort,” DeLauro said. “The point is everyone who is eligible ought to have access to it.” 

Another population that will be particularly vulnerable are undocumented parents, who can claim the child tax credit if their child has a social security number. To do that, the parent has to have an Individual Taxpayer Identification Number (ITIN) for tax purposes. Many don’t, Burdick said, and the waiting time for one is currently about 21 weeks. 

Assuming those parents want to apply for the credit, they have to apply for an ITIN, which means they likely won’t see any payments from the child tax credit until next year at the earliest. 

In Boston, Dr. Lucy Marcil is already coming up against the intricate challenges of reaching low-wage populations. Her nonprofit, StreetCred, is one of the few organizations that has already been reaching these groups with information about tax credits and filing since 2016. 

And they do it through pediatricians’ offices. 

Most kids see a doctor every year, said Marcil, who is a pediatrician at Boston Medical Center. For her, it made sense to try to address how economic instability is tied to worse health outcomes by informing patients of the money available to them, including the child tax credit expansion this year, while they’re in the office.

About 30 percent of her patient population are immigrants or non-English speakers, more than half of all her patients are living under the federal poverty level, and about 20 percent don’t file taxes, she said. 

Since the credit was expanded, StreetCred has ramped up communication with those patients. Initially, there was “a kind of mass confusion,” Marcil said. 

“A lot of people have said to me, ‘I don’t get welfare, I don’t get cash assistance,” Marcil said. “I told them, ‘[Most] American children are eligible for this — This has nothing to do with welfare or cash assistance.’”

To reach undocumented populations, StreetCred has also partnered with Greater Boston Legal Services to help parents apply for ITINs, if they wish, but each application process is individualized to each family. Some may not feel comfortable filing because of anti-immigrant sentiment that grew during the Trump administration, Marcil said. 

“We’re trying to be neutral in our education. And, although with the Biden administration we think tax filing will not be used as a way to persecute immigrants, we actually can’t say for sure that won’t happen or it won’t happen in the future,” Marcil said. “If a family truly is not known to the government, and they’re not aware they’re here, it may not be in the best interest for them to file.”

As the opening of the IRS portal nears, big national groups are also ramping up their messaging to help reach more parents. 

MomsRising, an advocacy organization of more than a million members, has been developing videos featuring members of Congress, kids and actors — including one with Alyssa Milano and America Ferrera — to raise awareness about the credit. They’ve created how-to videos in English and Spanish. 

They plan to roll out more communication, including in additional languages, later this summer. A lot of their work will also be focused on educating people on how they can teach others about the credit, which they believe will have an impact among marginalized populations. 

“Mom telling mom, friend telling friend, caregiver telling caregiver about the new opportunity through the child tax credit for particularly low-income families, who are too often excluded from benefits, is going to be critical to getting the word out about the new portal when it opens in July,” said Kristin Rowe-Finkbeiner, the executive director, CEO and co-founder of MomsRising. 

All of that work will face an entirely new challenge if the credit is not expanded beyond a year. Biden has proposed a permanent expansion of the part of the credit that makes it available to the poorest families in his American Families Plan, but it’s unclear whether that plan will be able to pass Congress. 

Democrats want to see the expansion become fully permanent, arguing it will be difficult for Republicans to cut the program after so many families begin receiving monthly checks. The timeline will also determine impact. 

DeLauro said she believes support for the tax credit is going to continue in any iteration. 

“I think the administration is so wedded to the tax credit that I think a proposal will come up in whatever configuration we are going to deal with this issue,” she said. “I don’t believe for one moment that the administration is going to back off their 100 percent support.” 

If so, the potential is significant. Marcil said she sees it when she talks to her patients. When she’s able to break down the credit and break through to them, “there is a huge sense of relief.”

“Just knowing they will have that regular income that they can use on a monthly basis to pay their rent to feed their children, to meet their basic needs,” Marcil said. “I think it’s really transformative and it’s a unique thing we have not experienced in this country yet.”