Notably, the payments are projected to cut the child poverty rate in half, and anti-poverty groups say the program will do more to close racial equity gaps than any single policy in decades. In particular, children of color, who are disproportionately impacted by hunger and poverty, stand to benefit the most, said Sergio Mata-Cisneros, domestic policy analyst for Bread for the World, a Christian-based, anti-poverty group in Washington, D.C.
“It really is historic,’' Mata-Cisneros said. “People are having this extra inflow of cash will be able to buy groceries and pay bills, while families whose parents have two jobs and the second job is really crappy may be eligible to quit and spend more time with their children.”
There’s little debate about the impact of a tax program that delivers monthly payments to families in need. Nearly half a million Georgia children live in poverty — one in every five children — federal estimates show.
But policy experts caution that there is no quick-fix to the poverty dilemma. Over the long term, it’s unlikely that the six monthly payments will be able to sustain families, said Francine Lipman, a tax law professor at the University of Nevada, Las Vegas, who serves as a Nevada tax commissioner.
To make a lasting impact, other factors must be addressed, such as the availability of housing, food, transportation and healthcare.
“We’ve got to realize if it’s going to mitigate poverty, it’s going to take belts and suspenders and all hands on deck, and really trying to come up with different strategies,” said Lipman, who specializes in access to justice in tax.
Another challenge to the program’s success will be how well the IRS can deliver on the monumental task. In its role as the nation’s tax collection agency, it is already overburdened and plagued by limited resources, tax policy experts said.
Now, it’s being asked to determine eligibility and deliver benefits to an estimated 39 million households, including some of the most transient populations in the nation. Low- and moderate-income families tend to move more often and experience more changes in life circumstances than the general population.
“If they are able to pull this off, and I have a very optimistic outlook that they will, it will be quite an amazing thing,’' said Mark Steber, chief tax information officer at Jackson Hewitt, the nation’s second-largest tax preparation service.
Others warn that many of the nation’s very poorest families may be left out altogether. Parents that haven’t filed federal tax returns because their income is too meager can sign up through a non-filer tool that the IRS has created.
“We've got to realize if it's going to mitigate poverty, it's going to take belts and suspenders and all hands on deck, and really trying to come up with different strategies."
But not all will have access to the Internet or to a computer. That will make it more difficult for the agency to obtain current information on families’ marital status, child custody arrangements, the birth of a child and other circumstances that can impact eligibility.
“It’s difficult to imagine how all the qualifying families will be able to receive their share,” said Paul Sundin, an Arizona-based CPA.
Meanwhile, Onebo, the Decatur mom, said once she receives her check, she will head to the grocery store.
“I’m always just trying to keep food in the house,’' she said.
Most families qualify
The original child tax credit program — implemented in 1997 — provided a credit of $2,000 per dependent child under 17. But it was not fully refundable, and parents had to wait until they filed their tax returns to collect it. Those who didn’t file taxes weren’t eligible.
The expanded child tax credit provides annual payments of $3,000 per child ages 6 to 17, and $3,600 per child for children ages 5 and younger. There is no minimum income limit. And instead of making taxpayers wait until spring to receive the payment in a refund, the the $1.6 trillion economic stimulus package passed by Congress in March allows parents to get half of the amount in monthly payments through this December. Parents will receive the remainder when they file taxes next year.
Not only low-income families will benefit. Also eligible for the full payments are individual taxpayers earning up to $75,000 a year and married couples filing jointly and earning up to $150,000. Above those amounts, the payments start to phase out.
FAQ on tapping the advanced payments
What do I need to do to receive advance Child Tax Credit payments?
The IRS is using your 2020 or 2019 tax returns to establish eligibility and plans to automatically send payments. If you were not required to file a tax return for 2020, you must take action and use the non-filer tool to file a simplified tax return.
Who is eligible to receive the payments?
No minimum income is required. There are upper income limits. To get the full refund, the limit for married couples is $150,000 a year, and for single parents filing as head of household it is $112,500. You also must have your main residence in the U.S. for more than half of the year, though it doesn’t have to be a permanent address. You also must have a child who is 17 or younger this year and who you can properly claim as your dependent. Your child must have a valid Social Security number. You can check your eligibility to receive the credits.
What is the fastest way I can get the payments?
File your tax return electronically and provide information about your financial account so that you can receive your payments by direct deposit. You will need to provide routing and account numbers.
When will the IRS begin sending the payments?
July 15 is the date when the IRS plans to start disbursing the payments. They then will be sent monthly through December.
Will the payments affect any government benefits that I receive?
No. The advance child tax credit payments cannot be counted as income when determining if you or anyone else in your household is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds.
Source: Internal Revenue Service
Russ Story, a financial adviser in Douglas, said many people aren’t aware of the sizeable payments. So he is trying to raise public awareness by providing information about the credit on his website.
He said he is expects some couples will try to set aside some of the payments for the benefit of the child to help pay for their education, including college or a technical school.
“The folks that are higher up in the echelon, in the middle and upper-income brackets, this gives them an opportunity to further that child’s potential success,” he said.
For children of the poor, however, the money may not have a lasting impact.
“The folks that are higher up in the echelon, in the middle and upper-income brackets, this gives them an opportunity to further that child's potential success."
- Russ Story, a financial adviser in Douglas
Researchers at the Center on Poverty and Social Policy at Columbia University projected that the American Rescue Plan would lift more than five million children out of poverty this year. But that could only be done as part of a combination of policy elements of the Rescue Act that reached beyond the expanded child tax credit.
Those provisions include the extension of two key federal assistance programs for needy families: the Supplemental Nutrition Assistance Program, formerly known as food stamps; and the distribution of one-time direct payments of $1,400 for eligible adults and children.
Another option that would make a big impact on needy families is to to make the expanded credit a permanent provision in the tax code, said Allison Johnson, a national activist for the Washington, D.C.-based parent advocacy group, ParentsTogether Action, which has members in Georgia.
“We’re doing a lot of work on just getting parent voices out there,’' Johnson said. “We want to let everyone know why these payments need to continue past December.”
One Georgian who would like the payments to continue is Kakena Jones, who has six children, four of them between the ages of eight months and 12 years. The family lives in Nicholls, an agricultural community of 3,800 people in southeast Georgia, where 40% of households live in poverty.
She has worked for more than 17 years at a mental health group home. But recently, she had to get an evening job at Lowe’s to pay for childcare for her 4-year-old and eight-month-old. When the tax credit payments run out in January, she will be back to making do with less.
“It hurts, it hurts really bad when you hear your 4-year-old say, ‘Mom, I want you here with me,’ but you have to go straight to a second job,” Jones said. “And, by the time you get home, they’re asleep.”