This tax season, we have a huge opportunity to help families with the expansion of the Child Tax Credit through the American Rescue Plan Act (or ARPA).
At United Way, our Financial Empowerment pillar focuses on the impacts of affordable, high-quality tax services to help lift people out of poverty and create stability. So why is the Child Tax Credit so important? And how can families access this specific credit when they file their taxes?
The Child Tax Credit is a tax benefit to help families who are raising children. The Child Tax Credit or CTC, has been around since the late 1990s and continues to provide critical support for low- and middle-income families. Historically, it has been shown to help families cover everyday expenses from buying groceries to paying rent and bills, affording childcare, and buying back-to-school clothes.
Where we're at today
The Advanced Child Tax Credit that was made available through the American Rescue Plan and builds on the successes of the original CTC with a few updates:
- The per-child amount increased. For the current tax season, eligible families receive $3,600 per child under age 6 and up to $3,000 per child between 6 and 17. The maximum credit was previously $2,000 per child and wasn’t made available to households with very low or no earnings.
- Families started receiving funds in monthly installments in July 2021. Eligible families who had previously filed taxes or used Code for America’s GetYourRefund.org, began receiving $250 or $300 per child monthly, representing half of the credit amount. To get the rest of the CTC, they must file taxes this tax season.
- Reaching families experiencing deep poverty. The CTC now extends eligibility to the 23 million children—disproportionately Black and Latinx children—who previously did not qualify because their families made too little. It corrects a long-standing issue with the policy: reaching the families who need help the most.
In fact, the City of Philadelphia estimates that if we work together to ensure everyone who is eligible claims their funds...
75,000 people in Philadelphia will move out of income-based poverty this year - including more than 46,000 children.
Why this matters
Research from some of the top anti-poverty think tanks across the country, including the Children’s Defense Fund, the Center for Law and Social Policy (CLASP), and National Women’s Law Center (NWLC), have found that the newly Advanced CTC has been a lifeline for families. According to the most recent Census Household Pulse Survey Data from August 2021, most families used the CTC to cover necessities, and recent estimates indicate the payments are contributing to a reduction in food insecurity for 3.3 million households with children.
Although, we know this is not a silver bullet, these monthly payments are clearly an effective, simple way to support families and create more stability.
How you can help
It's critical that all families with children take advantage of this vital tax relief. We can all play a role in helping ensure families have full access to CTC this tax season. The first step is staying informed. While effective, the rollout of the Advanced CTC has not been without challenges. In particular:
- Reaching “non-filers”: One of the bigger challenges is getting the word out to people who don’t normally file taxes. These are families who have historically made too little to file taxes. WHYY did a great piece on this challenge. Make sure you or your loved ones have all the facts and know that just because they haven't made enough money to file taxes, they are STILL eligible for CTC.
- New documents are being required by the IRS: When families file for 2021, they need to bring IRS-issued letters to their tax appointments. Letter 6419 (it’s official name) documents how much CTC a filer has received. Here is a bit more information about what to do with these letters when you or your fellow neighbors receive them.
- Confusion, anxiety, and misinformation: As with any new program, there will be news that will be misleading. It’s very important that we direct people to the experts in our community who can ensure that they get all their questions answered.
So, what’s next?
Now that we know the opportunity and the challenges we face, we must support families in our community by getting the word out. The best thing you can do is tell colleagues, friends, family members, neighbors, etc. to get connected to a VITA program near them. They can provide complete, accurate information and FREE tax help.
This is the second of a five-part series running December 2021– April 2022 highlighting VITA and accessing tax credits as a key strategy under United Way’s Financial Empowerment Pillar. If you missed our first installment about high-impact volunteering with VITA, which provides free tax prep services in our region, click here.