Stimulus Update: Due to IRS Error, $3.7 Billion in Child Tax Credit Payments Still Owed

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  • Some American families fell through the cracks, receiving no Child Tax Credit payments.
  • Families are still owed an estimated $3.7 billion.
  • For most, filing a 2021 tax return will set things right.

Given the number of checks the IRS was tasked with sending, it's no surprise that some never made it to the intended recipients.

Expanded Child Tax Credit payments played a huge role in the lives of millions of American households during the worst of the pandemic. Between July and Dec. of 2021, expanded Child Tax Credit payments helped lift 3.7 million children out of poverty, according to Columbia University Center on Poverty and Social Policy.

If lifting millions of children out of poverty is not enough to satisfy the critics, the Center on Budget and Policy Priorities reports that the $5.1 trillion in total aid during the pandemic helped make the COVID-19 recession the shortest in history and fueled an economic recovery that brought the unemployment rate down from 14.8% in April 2020 to below 4%.

A herculean effort

First, the IRS was tasked with sending stimulus payments to all eligible American households. With very little lead time, the revenue service managed to comb through millions of household tax returns to find annual incomes and how many qualifying dependents were claimed. Based on those findings, payments were distributed by direct deposit into bank accounts and via paper check.

And then came monthly Child Tax Credit payments. While the IRS did an outstanding job under difficult circumstances, some households fell through the cracks, never receiving a Child Tax Credit payment. To be precise, a recent audit by the Treasury Inspector General for Tax Administration found that $3.7 billion is still owed to eligible households.

Here's a summary of audit findings:

  • 178.9 million Child Tax Credit payments were made between July and Nov. 2021.
  • Payments totaled more than $76.7 billion.
  • Of the total payments made, $1.1 billion were mailed to taxpayers who did not qualify (eligibility was determined by the last tax return filed).
  • The IRS failed to send approximately $3.7 billion to 4.1 million eligible recipients.

How the expanded Child Tax Credit worked

Child Tax Credit expansion increased the standard child tax credit from $2,000 (normally credited when taxes were filed) to $3,600 for children under the age of 6 and $3,000 for children ages 6 to 17. If a parent or guardian opted in, half the total Child Tax Credit ($1,800 or $1,500) was payable in six monthly installments between July and Dec. 2021.

Households with children under the age of 6 received a monthly payment of $300 per child, and households with children up to the age of 18 received $250 per child. The remaining half of the tax credit was refunded when households filed their 2021 tax returns.

What to do if you're one of the 4.1 million who did not receive Child Tax Credit payments

If you have an eligible child and did not receive Child Tax Credit payments, take a look at whether you're eligible. To be eligible, your adjusted gross income (AGI) must fall below these thresholds:

Single Filer Married Couple Filing Jointly
$75,000 $150,000

You're eligible for partial payments if your AGI falls below these thresholds:

Single Filer Married Couple Filing Jointly
Up to $200,000 Up to $400,000

If you are eligible, make the IRS aware of you by filing a 2021 tax return. Even if you're not typically required to file a return, file one anyway. Those who've filed an extension have until Monday, Oct. 17, to file their returns. If you have not filed for an extension, do not allow that to prevent you from filing your return. Your Child Tax Credit payment depends on the IRS having up-to-date information.

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