The expanded Child Tax Credit for tax year 2021 will help millions of children and their families across New Jersey, providing direct cash payments to the vast majority of families with kids. The poverty-fighting effects of this credit could be enormous, with roughly one in three children in poverty lifted above the federal poverty line. Another roughly 200,000 children would be lifted closer to the poverty line if their families claim the credit.
But that’s a big if. Many families in poverty did not file a 2019 or 2020 tax return because the Internal Revenue Service (IRS) does not require a tax return for single individuals earning $12,400 or less, or for married couples filing jointly earning $24,800. They may also not have applied for the COVID-19 relief payments.
Without basic information about eligibility from tax filings (specifically the Social Security numbers of dependent children and the Social Security number or tax ID number of the filer), the IRS may be unable to authorize and mail the payments to qualifying families. This means some of New Jersey’s most vulnerable children may not receive this critical lifeline.
New IRS analysis shows that up to 55,000 children in New Jersey may miss out on the expanded Child Tax Credit payments for tax year 2021. The IRS determined this by identifying individuals with dependent kids with Social Security numbers through their health insurance documentation who did not file a tax return in 2019 or 2020. Put differently, the IRS used health insurance data to estimate, by ZIP code, where children might live whose parents or guardians did not file a tax return and therefore might miss out on payments. However, some of these non-filers may have applied for federal pandemic tax relief checks, which contain the information the IRS needs to send out Child Tax Credit payments.
If the estimate is accurate, that would mean more than 1 in 5 children living below the poverty line in New Jersey might be unable to access their expanded Child Tax Credit payment.
The child-poverty-fighting power of the Child Tax Credit expansion lies in its simplicity — direct checks to families based on information the IRS already has. But the IRS can’t reach the kids who need it most if the agency doesn’t have the necessary eligibility information, either through the IRS Non-Filer Child Tax Credit Portal or through a filed tax return for 2019 or 2020.
To maximize the number of children who receive the expanded Child Tax Credit, state government, local officials, and community-based organizations should consider the following:
- Widely publicizing the IRS Non-Filer Child Tax Credit Portal at all government and nonprofit organizations where families with children go, including child care centers, schools, WIC offices, health clinics, etc.;
- Expanding grants and outreach for free tax preparation for the 2021 tax year;
- Engaging with direct-service providers to assist families in completing the online non-filer portal form, which can be complicated;
- Conducting in-person door-to-door campaigns (perhaps paired with other campaigns such as vaccination campaigns or voter registration) to help people enroll through tablets.
The ZIP-code level analysis for New Jersey is available below: