Getting child tax credit to lowest-income parents proves challenging

But that depended in part on the enhanced credit getting to the neediest of American families -- those with incomes so low they don't have to file taxes.

The Internal Revenue Service and community organizations across the nation spread out to try to reach these parents, blanketing them with information about the hundreds of dollars they could receive each month if they submitted a recent tax return or used special online portals created for non-filers by the November 15 deadline.

With the potentially final installment set to be delivered on Wednesday, the impact of these efforts remains uncertain. Some parents were connected with free tax preparation services to file their returns, while others were guided through the portals, according to several nonprofit groups interviewed.

Many low-income families, however, remained reluctant to take the steps necessary to receive the credit, even though it meant forgoing as much as $3,600 for each of their children for 2021, community organizers said. Parents voiced concerns about losing their public benefits, revealing their immigration status or being forced to pay back taxes, student loans or child support that they might owe, among other reasons.

"People that have been avoiding doing taxes for a reason still don't want to do this," said Jessica Brown, director of strategic initiatives at Community Development Advocates of Detroit. They are "worried that that was going to ignite a whole 'nother bit of 'you owe me, you owe me, you owe me' from the government."

It's not known exactly how many children are in families that had to act to receive the monthly installments -- estimates range from 3 million to 5 million kids. The vast majority of eligible parents are automatically getting the payments, which equaled half of their total credit.

The IRS said it is still determining how many parents used its online portal.

Another group, Code for America, worked with the White House and Treasury Department to launch a sign-up tool for non-filers in September. It was easier to use on mobile devices and was available in Spanish, unlike the IRS portal.

More than 115,000 simplified returns were successfully processed, providing filers with $438 million in refunds, said David Newville, senior program director of tax benefits at the nonprofit group. But most people were claiming the coronavirus stimulus checks -- only more than a fifth received the monthly child tax credit payments.

Families that missed out on the monthly payments can still receive the full enhanced credit if they submit a 2021 tax return next year. Both the IRS and Code for America plan to renew their efforts during the upcoming filing season.

Also, if the Democrats' $1.9 trillion spending plan gets through the Senate, the enhanced monthly payments could be renewed for 2022, with additional funding for outreach as well. This could give non-filing parents more incentive to submit a tax return, and the IRS and community groups another opportunity to convince them.

Enhanced credit

The $1.9 trillion American Rescue Plan, which Biden signed into law in March, made several significant changes to the existing child tax credit for 2021. It increased the credit's size, giving eligible families up to $3,600 for each child under age 6 and up to $3,000 for each one ages 6 through 17.

Lawmakers decided to send half the credit to parents in monthly installments -- up to $300 for each younger kid and up to $250 for each older one -- from July through December to help them pay the bills and take care of their children's needs. Families will receive the other half when they file their 2021 tax returns next year.

Also key to fighting poverty: The relief package made the tax credit fully refundable so that more low-income parents can take advantage of it. It had been only partially refundable -- leaving more than 26 million children unable to get the full credit until this year because their families' incomes were too low, according to the Treasury Department.

Most parents didn't have to do anything to get the funds since the IRS already had their 2020 or 2019 returns showing they claimed the regular child tax credit, which was $2,000 for each child up to age 17 until this year. Roughly 36 million households, containing 61 million children, have been receiving the monthly payments.

Outreach efforts

The IRS worked with more than 11,000 nonprofit organizations, churches and community groups over the summer and fall to host events and spread the word about the enhanced credit, aiming to reach non-filing families.

It also coordinated with hundreds of federal agencies, state governments and municipalities to share information with their constituents and clients.

Local groups tried a variety of methods to connect with parents. But finding those who don't file taxes was not easy since they are relatively few in number. Two nonprofit leaders interviewed likened it to finding a needle in a haystack.

The Michigan Department of Health sent text messages about the credit to its clients receiving food stamps, which resulted in a big uptick in appointments with tax preparers, Brown said.

Code for America held a webinar for parents at Chicago's public schools, which organized activities in zip codes where non-filing parents likely live and sent fliers home in children's backpacks.

Teams from Springboard to Opportunities knocked on more than 400 doors in the 10 affordable housing communities in Mississippi, Alabama and Maryland that the nonprofit group works with. They informed parents about the enhanced credit and used tablets to walk those who needed help through the IRS portal, said Aisha Nyandoro, the organization's CEO.

In southwest Detroit, outreach workers from Congress of Communities set up tables and distributed fliers at different events, including Music in the Park concerts, Police Athletic League football games and National Night Out, said Amanda Holiday, the nonprofit group's early childhood programs director. It also participated in Halloween Trunk or Treat activities to inform parents as their children collected candy from cars.

When families expressed interest in the child tax credit, the workers would get their names and numbers and have tax preparers call them back, Holiday said. By filing returns, as opposed to using the portals, parents could also learn if they qualify for other tax credits or government assistance.

Talking to people face to face was typically far more effective, said Drew Astolfi, director of field support at Community Change, which harnessed its network of local community groups to educate parents and allay their concerns about submitting their information to the IRS.

"It took a little bit of agitation and cajoling. But for a lot of people, it wasn't enough to get them to file," said Astolfi. "For a lot of those people, you needed to tell them we're going to have a night where we're talking to an accountant."

Outreach efforts in the metro Detroit area helped drive many more people who hadn't filed tax returns recently to the Accounting Aid Society, which provides free tax preparation for low-income residents. The nonprofit group assisted nearly 1,600 non-filers this year, up from around 500 last year, said Matt Hetherwick, director of individual tax programs.

Many community groups plan to continue to push parents to file their 2021 tax returns next year so they can claim either the second half of the tax credit or the full amount if they didn't get the monthly payments.

In Detroit, the society's preparers have explained to non-filers that they need to come back next year to submit their 2021 return to receive the rest of the funds. It also plans to follow up with parents to remind them, Hetherwick said.

More tax prep help will be available during the regular filing season in 2022. Nevada Free Taxes Coalition, for instance, will likely have nearly three dozen sites in Southern Nevada that it will encourage parents to visit. It had only two locations in Las Vegas this summer and fall.

"The bottom line is if you have not already received the child tax credit, it's not too late," said Pat Smith, program director at the coalition, which helped roughly 100 to 150 people file their taxes and claim the credit this year.

Reducing poverty and hardship

However many of the lowest-income parents wound up filing returns or using the portals, the enhanced credit definitely helped reduce child poverty this year, said Elaine Maag, principal research associate at the Urban-Brookings Tax Policy Center. That's because millions of other families who had been receiving a partial credit became eligible for the full amount this year, thanks to it becoming fully refundable.

"It does most of the work of lifting people out of poverty, more so than the higher credit amount," Maag said of the refundable provision.

About half of adults said they spent the monthly payments on food, according to an Urban Institute analysis of Census Bureau data from mid-July to mid-September. The money was also commonly used for clothing, utilities, school books and supplies.

Those who received the monthly payments said it made a big difference.

One mom told Nyandoro that she was able to take her boys to the store to pick out their own backpacks, instead of getting donated ones.

"We know these checks have made a significant impact," Nyandoro said. "There's still a pandemic. A lot of individuals are still struggling to get back to work. They are struggling to find child care. Inflation and the cost of everything is going up."

"This has allowed individuals a little bit of breathing room," she said.

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