State outreach is necessary to reach the neediest children
As lawmakers in Washington debate the extension of the child tax credit, nearly 1 million New Jersey families with children under age 18 have already received advance monthly payments starting in July to help them pay for food, transportation and housing.
Given the enormous financial burden of COVID-19 and the costs of raising children, especially in a high-cost state, New Jersey’s families have needed this critical tax relief to cover those costs. These monthly payments, which averaged $400, helped families across the state pay for food, rent, bills and other household expenses. Beyond the immediate benefit to these families, these payments have added more than $1.5 billion to New Jersey’s communities over the past four months.
The antipoverty effects of the expanded child tax credit have been spectacular. Child poverty rates nationally declined by 25% thanks to the expanded child tax credit payments. Census bureau data shows that these payments have reduced food insecurity and financial hardship.
But many families that need the money most are not getting it in New Jersey. Only about 60% of eligible families reported receiving the advance payments, based on census bureau survey data analyzed by the Social Policy Institute. And these children may be concentrated in the lowest-income households that have traditionally been left out of tax-relief programs. Among children in families earning less than $25,000 a year, only 57% received the credit, despite almost universal eligibility, compared with 73% of children in households earning between $75,000 and $100,000.
Why would the neediest families also be least likely to obtain the credit? After all, qualifying for the full credit is as simple as having child dependents under 18 (with Social Security numbers) and earning below $150,000 a year.
For one, the IRS is distributing the tax-credit payments using preexisting tax-filing information. Families earning low incomes are not required to file income tax returns, so the IRS may not have their data on file. Additionally, children born in 2020 or 2021 may not have been included on prior tax returns. Finally, although most children in mixed-immigration-status households are U.S.-born citizens, their parents may have been reluctant to complete annual tax filings in previous years due to concerns about their impact on family immigration status.
The IRS has shown some progress in reaching more families, with about 67,000 more New Jersey children receiving benefits in October than in July.
Ways to help
But New Jersey’s state and local governments, as well as community-based organizations, have an important role to play to help residents get these payments and close this gap. Here are three concrete ways New Jersey can ensure more families receive their child tax credit benefit:
- Publicize the GetCTC.org nonfiler tool. This website allows anyone, even people who did not file taxes in previous years, to enter simplified information and begin receiving child tax credit payments, if eligible. Available in English and Spanish, the tool can walk anyone through the application process. Local governments and community-based organizations can offer assistance to their members and service populations. However, use of this portal is scheduled to end on Nov. 15, 2021.
- Perform direct outreach. State and local governments and agencies already collect a wide range of data on family income and children. The state Medicaid agency, for example, has enrollee data for children using public health insurance, almost all of whom would qualify for the tax credit. School districts routinely collect data on family income for free or reduced-price meal eligibility. Although elected officials have held events publicizing the credit, direct outreach from agencies already in contact with families by mail, phone, text message or in-person conversation may have substantially more impact.
- Enhance free tax preparation for 2022. Many of the important parts of federal COVID-19 relief have been embedded in tax filing. Economic stimulus checks, enhanced Earned Income Tax Credit changes and the child tax credit can all be claimed by filing income tax returns in 2022. Direct state funding and local support for free tax preparation in 2022 could pay substantial dividends for New Jersey’s economy, ensuring eligible households get the tax refund they are entitled to under federal law. These could include providing grants to existing providers to expand capacity, donating office space for conducting tax preparation services or providing training for potential tax preparation volunteers.
By boosting child tax credit outreach, New Jersey can assist families get the federal aid they are already entitled to, but cannot receive because of administrative red tape. With the clock ticking down to Nov. 15, when applications for advance child tax credit payments end, there is still plenty that state and local governments can do to get this much-needed tax relief in the hands of New Jersey families and their children.