Fearing filing season chaos, IRS pauses child tax credit web tool
But the administration feared the wrong people — namely those required to file — would use the non-filers portal, creating chaos at the IRS when it is already struggling to process tens of millions. statements, including those left over from last year.
Instead, the administration said it would reopen the portal after filing season ends on April 18, a senior official said.
In the meantime, he encourages low-income people to file a traditional tax return, both so they don’t have to wait for their money and because they can also get other tax benefits besides the child credit.
“We remain deeply committed to ensuring low-income Americans can get their child tax credit,” said Gene Sperling, senior adviser to President Joe Biden.
The ruling has disappointed some advocates for low-income people, who fear it will mean some will face long waits for help or miss out on payments altogether.
“This is going to be confusing for people,” said David Newville, senior program manager at Code for America, which developed the administration-promoted non-filers portal.
“If they’ve used the tool, they’ll want to use it again.”
Some won’t bother trying to file a full statement, he predicts.
“The full return presents many challenges for non-filers who find it difficult to navigate the process,” Newville said. “That’s a very high bar for some people.”
The administration’s decision is a setback for the Democrats’ campaign to use the child credit to raise living standards and comes as the IRS hands out billions in credit.
Although the Democrats’ breakout expansion expired at the end of 2021, there’s still money being doled out — at most, people only got half of the payouts in monthly checks last month. last year. They can collect the rest this year when they do their taxes.
The credits will be even more important for the millions of people who opted out of monthly payments or did not receive them last year. They are worth up to $3,600 per child.
The issue is a key way the administration was trying to get that money to people beyond the reach of the IRS. Typically, people earning less than the standard deduction — around $25,000 for couples — are exempt from filing returns.
Yet they were among the biggest beneficiaries of the Democrats’ credit expansion, getting by far the largest percentage increase in aid.
Working with Intuit, the IRS offered an online portal that allowed non-filers to fill out what was essentially a simplified 1040 tax form where they could report a few basic things like their family composition.
Although this is easier than competing with a traditional return, the tool has always been criticized as difficult to use, as it was not suitable for mobile phones and was not initially available in Spanish.
The White House then turned to a more user-friendly app developed by Code for America, urging the public to use it instead of the IRS portal. In just over two months, it was used by 114,000 homes, according to Code for America.
But a problem was brewing behind the scenes: many people who were required to file were mistakenly using the non-filers portal.
It was a manageable problem when it happened last fall.
But the administration was concerned that if something similar happens during filing season, which began Jan. 24, it would confuse the public and the IRS, a senior official said.
If people used the non-filers portal to try and claim the rest of the money and then later filed a full statement, for example, they would be flagged by the agency for filing two statements, which is not authorized. (Persons wishing to make changes to a return are required to file amended returns.)
“Last year, since the ranking season was already over, those mistakes were kind of harmless, no fault,” Sperling said. “But if that happened at the start of tax filing season this year, those families would go through the child tax credit portal, and then when they tried to file their normal tax returns, they would look like trying to file their taxes twice. ”
“It could deprive them of any benefit for months while the IRS tries to fix their situation.”
For now, the administration says it is focused on getting low-income people to file traditional tax returns, noting that many of them will also be eligible for other relief like the earned income tax credit and separate and enhanced relief for child care expenses. — which could mean thousands of dollars more in help, beyond the child credit.
And there is a network of organizations that help low-income people file their taxes, including through the VITA or Volunteer Income Tax Assistance program and another initiative called Tax Counseling for the Elderly – although some have lamented not being able to direct customers to the Code for America portal. .
“It’s not ideal,” said Alejandro Valenzuela Jr., director of tax and financial services at Prepare + Prosper, which provides free tax preparation services to low-income people in Minnesota. “I wish it was still available now. It would have been nice to make it available to these families.
After deposit season ends, the administration will reopen the non-filer tool, Sperling said, and launch a public campaign to encourage people who still haven’t received their money to take advantage of it.
“Once normal tax season is over, we will again do everything we can to get the remaining low-income parents and grandparents who have not filed to do so through this streamlined process,” he said. declared.