IRS warns start of child tax credit program could be delayed

The head of the IRS warned this week of potential delays to the launch of the new monthly child tax credit payment program authorized under President Biden's $1.9 trillion stimulus plan.

Commissioner Chuck Rettig, appearing before the House Ways and Means Committee on Thursday, raised concerns about whether the IRS will be able to get the relief program up and running by July as Congress had planned.

Under the law, known as the American Rescue Plan, most American parents can expect to receive $3,000 for every child ages 6 to 17 and $3,600 for every child under age 6. The expanded amounts are tapered off once income hits $75,000 for individuals and $150,000 for married couples. (Families are normally entitled to up to $2,000 annually in refundable tax credits per child).

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Families could also opt to receive monthly payments – roughly $250 to $300 per child – instead of an annual lump sum.

If families earn too much to qualify for the expanded tax credits, they can still receive the $2,000 credit for their children if their income level is below $200,000 for individuals and $400,000 for married couples.

But with a massive backlog of unprocessed tax returns and the added responsibility of getting millions of stimulus checks out the door — as well as a one-month extension of the tax-filing deadline from April 15 to May 17 — Rettig said the IRS may not have the capacity to set up an online portal for the new program.

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"We now have one month less to do the development," Rettig said. "The same people who do our income tax processing, [economic impact payment] processing are the people that need to develop that portal. So I don't have the resources to devote to that portal until filing season ends, which is May 17."

Rettig pledged to "do our best" to start sending out payments by the beginning of July.

“The importance of getting through this is not lost on anyone," he said.

Experts say the overhaul of the 24-year-old child tax credit could have significant implications for millions of families, particularly low-income households: More than 4 million children could be lifted out of poverty, according to one analysis conducted by the Center on Budget and Policy Priorities at Columbia University.

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Still, the quirky design of the law sometimes means that the poorest families are bypassed and do not receive any money: Families who owed little or no income taxes were only eligible for up to $1,400 per child, rather than the $2,000 benefit provided to wealthier families, according to the Brookings Institute.

In fact, about 40% of the tax credit went to families earning more than $100,000, while just 15% went to low-income households earning less than $30,000, Brookings found.