Child Poverty

Families Deserve a Robust, Permanent Simplified Tax Filing Option

March 1, 2022 | National

It’s tax-filing season and even though monthly Child Tax Credit (CTC) payments have been stopped since the end of 2021, there is still a lot of money on the table for families with children:

  • Many families received six monthly CTC payments that started in July, totaling up to half of the total credit for which they were eligible. Families who received these payments can still get the second half of that CTC (up to $1,800 per young child, or $1,500 per older child) and families who missed out on the monthly payments can receive the entire 2021 CTC ($3,600 per young child, $3,000 per older child).
  • Many families with children—as well as many adults without children—are eligible to receive the Earned Income Tax Credit (EITC), thanks to an expansion of the program in the American Rescue Plan. This program offers up to $6,000 for some families with children.
  • Families who missed out on the third Economic Impact Payment of $1,400 per household member in early 2021 can still get these payments.

To get all of these benefits this year, families will have to file a full tax return, a notoriously complicated and frustrating process that has proven to be a significant barrier to accessing tax benefits for families. To improve access to these benefits, the IRS must make tax filing simpler and easier for families.

[Here are a few resources for those who might need some help with the filing process.]

For the past few years, the IRS has made the process of claiming these benefits easier by making simplified tax filing available to some families. Simplified filing is a streamlined tax filing process that doesn’t require families to report and verify their income or provide any tax documents. This process eliminates key barriers to filing such as difficulty accessing tax documents or fear of misreporting information to the IRS for many low-income families. Families who use simplified filing tools only have to provide their Social Security or Tax Identification Numbers, some information about the children or other relatives being claimed on the return, and bank information for receiving their refunds.

Last year, the IRS created a simplified tool that families could use to sign up for monthly CTC payments. This tool allowed families who were not required to file taxes (meaning their income was below $12,400 for single filers or $24,800 for married filers) to file a simplified tax return to claim their CTC. In 2020, the IRS set up another simplified filing tool for taxpayers to claim their stimulus checks.

These tools helped millions of families access the CTC and their stimulus payments without having to go through the complicated process of filing their taxes. The most streamlined tool—Code For America’s GetCTC tool—launched in September 2021 and helped more than 115,000 families sign up for the CTC in just a few months. Code For America estimates that their tool will reach significantly more families this year with minimal additional outreach from the IRS and state agencies.

Unfortunately, the IRS has placed some limits on simplified filing this year that prevent these tools from helping as many families as they should. The IRS has to issue new regulations every year to set up the simplified filing process, meaning that the government essentially has to start from scratch every year. This year, the IRS issued the necessary regulation very late, which means that simplified filing won’t be an option for families until May 2022, after the traditional tax filing season is over. The IRS’s simplified filing plan for 2022 has other significant drawbacks as well:

  • Like previous versions, this simplified filing tool will only be available to households with income below roughly $12,400 for single filers or $24,800 for married filers that are not required to file a full tax return.
  • Users will be required to report the amount they received in advance CTC payments to the IRS, even though the IRS already has this information.
  • This tool does not provide a simplified process for claiming the Earned Income Tax Credit, thereby putting many families in danger of missing out on a significant additional tax benefit.
  • Families in Puerto Rico will not be able to use this simplified filing tool.

While we’re grateful that the IRS is making some form of simplified filing available in 2022, we believe that any plan that requires users to provide information to which the IRS already has access and doesn’t allow them to claim the full range of tax benefits for which they qualify is insufficient. 

It’s time for the IRS to create a permanent, robust simplified filing process, so all families can easily access crucial programs like the CTC and EITC. To maximize the effectiveness of these programs, CDF and the Automatic Benefit for Children Coalition have called on the federal government to build a simplified filing process that: 

  • Is available year-round, every year in multiple languages.
  • Is secure, user-friendly, and available on mobile devices as well as computers.
  • Only requires taxpayers to provide information that is absolutely necessary to calculate the CTC and other critical social benefits. 
  • Allows families to claim the most significant social benefits administered through the tax system—including the CTC and the EITC.