Stimulus Update: What Happens to Monthly Payments if the Government Shuts Down?

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Would political infighting lead to missed enhanced Child Tax Credit payments?

Key points

  • The Child Tax Credit is working, lifting millions of children out of poverty.
  • A government shutdown would not have had an impact on the December payment.

In September, Congress kicked the can down the road by passing a spending bill that funded the U.S. government through today, Dec. 3. And last night, they kicked it down the road again by reaching another deal that keeps the government up and running through mid-February.

Given the current partisan climate, there was some question as to whether the two houses would come to an agreement. Just this week, Republican lawmakers said that they wanted to drive the government to a shutdown to postpone the president's implementation of a vaccine and testing mandate. Still, as much as lawmakers like a good stand-off, there was little chance that members of either party would have wanted to take the blame for a shutdown during an economic recovery.

But what happens next time? What if there is a shutdown in mid-February? If President Biden's Build Back Better Plan passes as it is, the Child Tax Credit (CTC) is slated to extend into next year. What happens to CTC payments if the government turns out the lights?

Read more: 7 Smart Things to Do With Your Child Tax Credit Payments

Contingency plans

Any time a shutdown looms, governmental departments develop a contingency plan, steps designed to minimize the impact. As part of the federal government, the IRS also comes up with a plan regarding both CTC and Social Security payments.

The good news

It appears that all scheduled CTC payments will continue to hit bank accounts, even if our elected representatives in D.C. cannot work together to keep the government running. Here's why: Some programs and tax credits are funded for the fiscal year. Other programs are paid out of an indefinite appropriation, meaning there's no "end date."

So, even if the government shuts down in February, CTC recipients will continue to receive the tax credit. Because they're a result of Biden's American Rescue Plan and do not run out at the end of a fiscal year, funding is not impacted by a government shutdown.

The IRS says that they plan to keep a subset of workers in place, even if there's a shutdown, to ensure that payments arrive in bank accounts as expected.

Interesting aside: Social Security payments are also paid out of indefinite appropriations, meaning Social Security recipients can also expect their monthly payments whether there's a short-term government shutdown or not.

CTC is working

ParentsTogether Action, a national parenting organization, conducted a survey following July's first Child Tax Credit payment. Fifty-six percent of the families surveyed said that receiving that first check reduced their financial anxiety. More than 50% called the tax credit a "huge deal," while another 40% indicated that the enhanced funds helped their family budget.

Further, Treasury Secretary Janet Yellen told Congress this week that a 24% decrease in food insecurity has been tracked since the first checks were sent out in July. Yellen called the outcome "a profound economic and moral victory for the country."

Read more: Stimulus Update: 4 Ways the Child Tax Credit Has Benefited Families in Need

Will there be a CTC extension?

With final checks set to roll out on Dec. 15, the big question is whether the Child Tax Credit will be extended into 2022. Initially, Biden called for the tax credit to last at least five years, but he received pushback from both Republican lawmakers and more conservative members of his own party.

If the president's Build Back Better Plan is passed as it is, CTC monthly payments will be expanded through 2022 and become available to low-income families permanently after that. If it does not pass and the credit ends this month, it will likely be due to Republican lawmakers and two Democrats -- Sen. Joe Manchin and Sen. Krysten Sinema -- who say they want to see significant cuts to the president's proposed plan.

According to the Center on Budget and Policy Priorities (CBPP), providing a permanent, fully refundable CTC would lift an estimated 3.6 million American kids out of poverty. And if the maximum credit is increased to $3,600 per child, the number would go up to 4.1 million children.

It's tough to argue with those numbers.

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