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Child Tax Credit 2021: why are many American households missing their payments?

Many low-income families are missing the Child Tax Credit payments because the IRS failed to register to them before the first payment was sent in July.

Low-income families are missing the Child Tax Credit payments because the IRS failed to register to reach them before the first payment was sent in July.

The Biden administration and many Democrats on Capitol Hill have argued that the newly enhanced Child Tax Credit will cut child poverty in half this year. But, there is one major catch: low-income families have to get the money.

After the first payment was made on 15 July, the People’s Policy Project released a blog highlighting that IRS was missing information on around seven million children whose families would be eligible to receive the payment. Many of these children have parents or guardians who may not be required to file a tax return, which is how the IRS collects the information needed to distribute the payments.

The author of the blog, Matt Bruenig, also expressed frustration and concern over the Washington Post’s reporting that of the seven million, “only 720,000 kids are successfully receiving the new Child Tax Credit.” Based on these figures, Bruenig estimates that “90% or more of the (mostly very poor) kids the IRS needed to reach” before July were not registered.

While the IRS does not have information on many of these families, other agencies in the federal government might.

Some experts are confused why the Social Security Administration (SSA), in partnership with state agencies, was not tapped to assist in the distribution. Many of these families that the IRS does not have information for receive federal benefits like Supplemental Nutrition Assistance Program (SNAP) or Temporary Assistance for Needy Families (TANF), meaning that with some information sharing, the seven million figure could be brought down. 

What is the IRS doing to help families register?

The IRS launched an online tool, Child Tax Credit Non-filer Sign-up Tool, which allows those eligible to sign up online to assist in the registration effort.

While a good starting point, the rollout has been fraught. 

The Center for Budget and Policy Priorities (CBPP) has reported on challenges users have faced, and it is clear that serious miscalculations were made. In their conversations with users, they found that “some filers may face language and disability barriers that make it more difficult to access the credit, and others may lack internet access, email addresses, or technical proficiency to provide the required information.”

Users and advocates have voiced their concerns with the tool, highlighting that it is not mobile-friendly, which creates a major barrier for those without a computer or internet access. It is also only available in English, which discourages many eligible immigrant families. 

For that reason, Kris Cox, a senior policy director at the CBPP, told Vox that in-person outreach is “critical.” The IRS has partnered with community-based organizations around the country, but funding is limited.

Yes. While some immigrant families may not file taxes, if their annual income falls within the eligibility threshold they should sign up. However, recent reports have surfaced showing that the fact that the tool is only available in English is a barrier for many who wish to sign up.

The IRS has not announced plans to add additional languages, but it is not out of the question as they recently launched a Spanish version of the Child Tax Credit Update Portal. Families without legal immigration status should know that “By law, the IRS guarantees the confidentiality of tax data. Information on tax forms is not shared with any other agency or person, including government immigration enforcement agencies, except in criminal or terrorist investigations.”

The information provided to the IRS will not be shared with Immigration and Customs Enforcement, or any other law enforcement agency.

Source: IRS, and CBPP

Who should use the Child Tax Credit Non-filer Sign-up Tool?

Those who did not receive the July Child Tax Credit payment should consider using the tool to register if they were not required to file a 2020 tax return or “didn’t file one and don’t plan to” and “Have a main home in the United States for more than half of the year.”

The tool can also be used by households who are eligible to receive federal stimulus checks but did not receive them.

How could these issues be addressed moving forward?

Democrats have unveiled a $3.5 trillion reconciliation package that would include a provision to make the changes to the Child Tax Credit permanent. This would ensure that the decreases in child poverty expected from the bill are sustained in the long run.

However, the failure of the IRS to register the most economically vulnerable children should not be forgotten when lawmakers draft the reconciliation package. Funding to ensure that agencies share information should be included, and funding to insure registration information is available in more languages.

The IRS has developed a tool for families to manage their payments, which seems to work very well, highlighting again the lack of investment made to reach low-income families with whom the IRS does not typically interact.

Elisa Minoff, a senior policy analyst at the Center for the Study of Social Policy, told Vox in an interview that “Right now, it’s a system that works really well and is super straightforward for moderate-income and upper-income families, and doesn’t work very well for lower-income families.” Minoff continued by saying that the goal, especially if the Child Tax Credit structure is changed permanently, should be to make the registration process “as automatic as possible, so families don’t have to take affirmative steps to get the support they need.”