The child tax credit has taken on newfound importance with the passage of the $1.9 trillion American Rescue Plan, which includes a one-year increase of the credit to up to $3,600 per child. In the wake of the pandemic, the law also requires the IRS to make advance payments of the expanded tax credit in the second half of 2021.
Although Democrats in Congress have touted monthly advance payments, it's unclear whether the IRS can set up a system to make monthly remittances by July. The law does leave open the possibility of having the agency make the payments less often.
We asked two professors and authors of ALM's Tax Facts with opposing political viewpoints to share their opinions about providing regular advance payments of the child tax credit.
Below is a summary of the debate that ensued between the two professors.
Bloink: The child tax credit provides a powerful benefit for parents who are struggling financially. These families no longer have the benefit of the dependency exemption when it comes time to file their taxes — making the expanded child tax credit critical to many hardworking Americans. This new proposal would get a sorely needed tax benefit to families who just can't wait to receive the benefit in a lump sum at tax time.
Byrnes: Offering advance payments of the child tax credit isn't something that can or should happen anytime soon. Yes, American families need relief. However, this isn't something that can happen overnight. From a practical perspective, what we'd be asking the IRS to do would create an administrative nightmare. Rushing something like this through wouldn't help anyone — even the families who this credit is designed to help the most.
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Bloink: We've already found ways to provide across-the-board relief to business owners in the way of advance tax credits. In other words, we've recognized that this type of tax assistance can be most beneficial during difficult times when it's provided in advance. This would be a way to provide similar help to struggling families who are having trouble with daily expenses like keeping the lights on and putting food on the table.
Byrnes: The IRS is strained enough as it is. The IT system needed to effectively administer such a widespread program would have to be created from scratch. You'd have to somehow constantly monitor to determine whether taxpayers are even eligible for the credit — rather than verifying eligibility once per year. What happens when an ineligible taxpayer receives the credit? How would we verify whether a taxpayer has had a change in status, so that they might be eligible for a larger and more beneficial credit? These are all questions that have to be answered before we can ever consider a program like this.
