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By Patrick Cooney and Stacy Taylor

Introduction

As part of the American Rescue Plan, Congress dramatically expanded the Child Tax Credit (CTC). The new Child Tax Credit is worth $3,000 per child ages 6-17, $3,600 per child under 6, and is fully refundable. Half of a household’s credit will be paid out in monthly installments beginning in July of this year, with the remainder claimed on their 2021 taxes. The expansion of the Child Tax Credit is projected to cut the child poverty rate by 45%, a historic achievement. The potential impact of the expanded credit on the well-being of millions of Americans with low incomes is extraordinary. One Supplemental Nutrition Assistance Program (SNAP) recipient from Colorado wrote that with this money she “wouldn’t run out of gasoline for my car every week. My phone bill, internet, and car insurance wouldn’t be late every month.” Another wrote, “I wouldn’t personally skip meals in fear that my children would go hungry later if I didn’t.” And another wrote, “The money I spend out of pocket on groceries after my food stamps runs out could go towards bills, car maintenance, or maybe I could accumulate some savings.” For millions of Americans, the expanded CTC holds the promise of improved health, reduced hardship, and a sense of stability and dignity.

For the expanded CTC to achieve its potential anti-poverty impact, work is needed to ensure universal access for eligible families. To receive the credit, many households who do not typically file taxes may now be required to file. Many households with low or no earnings may not immediately understand this, not know how to file, or may assume that they do not qualify. Poverty Solutions at the University of Michigan partnered with Propel, the creators of Fresh EBT, to gather information from very low-income households who stand to benefit the most from the expanded CTC. Fresh EBT by Propel is a smartphone application used by over 5 million families who receive food assistance through SNAP. Propel regularly uses the Fresh EBT platform to distribute information about programs and services to SNAP recipients. During the pandemic, Propel has periodically invited users to share their experiences and recently fielded a set of questions regarding the Child Tax Credit expansion, gathering responses from over 10,000 families who are potential recipients of the CTC.1 Our primary finding is that welldesigned, user focused tools — such as a non-filer IRS portal that allows for simple  filing, real-time changes in family structure, and changes in bank account information — will be key to ensuring the families most in need receive the Child Tax Credit.

Key Findings

• Significant outreach is needed to ensure families understand the new Child Tax Credit. Less than half of eligible households surveyed know about the Child Tax Credit and feel like they understand it. Families who are aware of it and understand it call it life changing.
• An IRS non-filer portal that allows for simple filing, real-time changes in family structure, and changes in bank account information will be critical to the Child Tax Credit’s success. Thirty percent of respondents have not filed taxes and many others need to update banking information with the IRS. This may leave them at risk of receiving their Child Tax Credit late or not until tax time.
• Such functionality for the IRS portal will be particularly important for Black and Latinx households. These households are less likely to have received the Economic Impact Payments (EIPs), signaling the same may be true with the Child Tax Credit. By March 2021, 65% of Fresh EBT users had received the second EIP, but Black households were 30% less likely to have received the second EIP than white households. Latinx households were even less likely to have received the second EIP than Black households.
• The ability to update bank account information and dependent status on this portal is critical for many families. Over 30% of SNAP-eligible tax filers want to receive the CTC in a different account than where they received their tax refund, again signaling the importance for beneficiaries to be able to enter new information in real time.

Policy Recommendations

As of April 2021, IRS Commissioner Charles Rettig confirmed the IRS is on track to create a portal that would enable tax-filing households to update information mid-year relevant to the size of their payments, such as the birth of a child. It is not yet clear, however, if the IRS will build a portal for non-filers, enabling those with low or no income to gain access to the credit without filing taxes.

We encourage non-filing households to file their 2020 taxes in order to guarantee they will receive the payments, yet we recognize that without further action, some of the most vulnerable families will be left out. We urge the Biden Administration and the IRS – with support from Congress – to construct a user-friendly tool that enables the agency to capture necessary information from non filers. Our survey results also suggest it will be important for any portal to allow users to easily change banking information, due to the extent to which EIPs ended up in the wrong accounts.

Below, we have outlined three principles that we encourage the Biden Administration and IRS to consider in constructing a portal – for both tax filers and non-filers – with the end-user in mind, based on Propel’s experience helping more than 5 million households gain access to food assistance. Propel stands at the ready to partner with the IRS and Congressional leaders on the design and implementation of any tool that helps vulnerable households connect with the IRS.

1. The portal should enable consumers to access it through whatever medium is most convenient for them, including making the portal mobile-responsive and accessible through user-permissioned third-party intermediaries. Recent studies show that roughly 1 in 4 adults with low incomes rely solely on a smartphone to access the internet, and more than half lack broadband internet at home. Black and Latinx adults are also far more likely than white adults to rely only on smartphones and far less likely to have access to broadband internet. Ensuring the new non-filer portal is customized for smartphone use will be critical to ensuring widespread access. The new portal should consider inviting trusted third-party software providers to expand access to the tool. Given the deep challenges around reaching low-income populations with trusted information, enabling third-party software providers to facilitate access to the tool can be a critical tactic in bolstering outreach. This type of user-permissioned third party access need not compromise security, as it is subject to the same security restrictions as a consumer using the portal through their own browser.
2. Tax filers need to be able to enter new banking information into the portal. The American Rescue Plan directs the IRS to create a portal that will allow individuals to update information that will alter the size of their credit and allow them to opt out of monthly payments. As noted above, this portal must allow individuals to easily change their banking information, ensuring they receive their advance payments in a timely fashion. Of the households who filed taxes, over 30% reported a need to update their direct deposit information with the IRS.
3. To achieve broad access, message more than taxes. A primary source of confusion amongst non-filers was why, if they had little to no income, they had to file taxes. In addition, respondents frequently asked how they could “sign up” for the expanded CTC. Therefore, rather than messaging around tax filing, we might achieve broader adoption through the creation of a non-filer tool that encourages households to “sign up” for the CTC. The information households share with the IRS would be the same as is required in a simple tax return, but the messaging would be more squarely focused on ensuring access to CTC payments.

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