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Claiming Complexity

SOLUTIONS TO IMPROVE TAKE-UP AND ADMINISTRATION OF THE CHILD TAX CREDIT AND EARNED INCOME TAX CREDIT

The Child Tax Credit and the Earned Income Tax Credit have been effective policies in ameliorating poverty and providing crucial financial assistance for millions of American families. Despite decades of continued bipartisan support, administrative challenges—including underwhelming take-up rates, improper payments, and an ineffective audit process—have hampered the credits’ effectiveness.
While no silver bullet will induce 100% of eligible Americans to claim the credits, the Treasury Department should consider a constellation of solutions to respond to the array of barriers. Further, as Congress continues to debate potential future expansions of either program, it should bear in mind the administrative hurdles that continue to leave some eligible families excluded. To be durable—rather than risk repeal once the opposing party is in power—any legislative reforms to the CTC or EITC should be enacted through a bipartisan process.

Working with experts from across the ideological spectrum, the Bipartisan Policy Center developed recommendations to achieve these goals that are grounded in the political foundation of bipartisanship. The following reforms would increase credit take-up among eligible Americans, curtail improper payments, and better attune the audit process to taxpayers’ needs.

BPC’s Recommendations

Increase Awareness and Uptake

  • Develop a dedicated office at the Internal Revenue Service focused on the administration of social benefit programs.
  • Increase communication and outreach about the CTC and EITC.
  • Improve coordination between federal agencies, state and local governments, the private sector, and nonprofits.
  • Streamline the process of claiming state and local versions of the CTC and EITC.
  • Strengthen technology resources people use to access public benefit programs.
  • Bolster utilization of Volunteer Income Tax Assistance sites by expanding its grant program.

Reduce Improper Payments and Improve Audits

  • Enhance upstream processes to increase tax credit claiming accuracy.
  • Reinforce downstream processes to better respond to improper payments.
  • Improve communication and support for taxpayers during audits.
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