Democrats get good news from IRS

Democrats are welcoming the IRS’s announcement that it’s on track to start making monthly payments of the child tax credit in July, a step that could help their effort to make the expansion of the credit in President Biden’s relief law permanent.

Biden’s coronavirus relief law, enacted in March, directs the IRS to issue advance payments of the credit on a periodic basis, so that families receive money in installments throughout the year rather than in a single payment after they file their tax returns.

IRS Commissioner Charles Rettig said at a Senate Finance Committee hearing Tuesday that he expects the agency to be able to start making payments in July, as the relief law prescribes, and on a monthly basis, as Democrats had hoped.

Democrats see the monthly payments as a key way to reduce child poverty and help families during the pandemic. A bumpy rollout of the payments could make it harder for Democrats to permanently expand the child tax credit and tout the expanded credit ahead of the 2022 midterm elections.

“I was encouraged both by commissioner’s assurances the IRS in on track with roll out of the child tax credit advance payments, and that he would make the committee aware of any issues that may arise,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement to The Hill on Wednesday. “It’s critically important that roll out go well as we work to extend the benefit beyond this year.” 

Biden’s relief package expands the tax credit in several ways for 2021. In addition to directing the IRS to make advance payments of the credit in the second half of this year, the law increases the credit amount from $2,000 to $3,600 for children under age 6 and to $3,000 for older children. 

If the IRS is able to make monthly payments starting in July, families could receive half of the child tax credit that they are entitled to for 2021 through advance payments, in amounts of $300 per month for children under 6, and $250 per month for older children. They would receive the other half of the credit amount for which they’re eligible when they file their 2021 tax returns next year.

During a House hearing last month, Rettig expressed concerns about a time crunch, saying the extension of the tax-filing deadline from April 15 to May 17 gives it less time to implement the advance payments of the child tax credit.

But on Tuesday, he expressed a more confident note, saying, “We fully expect to launch in July. We expect to launch with payments going out on a monthly basis.” He added that he would inform Congress if the IRS ends up being unable to meet the July deadline.

Rettig’s comments come as Biden is planning later this year to release a recovery package focused on helping families. The package is expected to extend or make permanent the expansion of the credit.

Democrats who have been leaders of the effort to permanently expand the credit argue that the credit is more useful for families if they receive money throughout the year. If families find the monthly payments helpful this year, it could give momentum to the push to make the expansion permanent.

“As any parent will tell you, expenses like formula, diapers, and child care can’t wait until tax time. I’m pleased the IRS is on track to make the expanded Child Tax Credit payments monthly to help families during a time so many are experiencing significant challenges,” Sen. Michael Bennet (D-Colo.) said Wednesday 

While Rettig’s comments about the rollout being on track for July are promising for Democrats, Republicans are highlighting implementation challenges.

GOP lawmakers, who generally dislike the expansion in Biden’s relief package and think it’s not a well-targeted way to provide pandemic relief, are raising concerns that the monthly payments could result in an increase in fraud.

They have pointed to the fact that watchdogs have previously found high improper payment rates for refundable tax credit programs.

Sen. Chuck Grassley (R-Iowa) said that findings of a high improper payment rate for the Affordable Care Act’s premium tax credit, which is advanceable, “suggests the proposal to make the child tax credit advanceable could result in billions more of improper payments.”

Rettig said the IRS was planning to work to prevent fraud and go after any identity thieves who try to take advantage of the expansion.

“We’ll work from a deterrence perspective, but we’ll also chase those that come in unlawfully,” he said. 

Democrats said they would work to ensure that the IRS puts in place strong fraud and identity theft protections, but some have also taken issue with Republicans’ focus on this issue.

Sen. Sherrod Brown (D-Ohio) said during Tuesday’s hearing that Republicans’ “alarmism” on improper payments “ignores the billions in revenue we’re losing out on from corporations and wealthy people who use every trick in the book to try to get out of paying their fair share.”