Progress towards a Simpler Approach
A simpler approach to filing taxes and receiving credits is commonplace in other developed nations and would make life easier for millions of low- and middle-income Americans.1 Unfortunately, what could be a simple issue of better customer service and clearer public policy has often become a political football. However, simplifying government processes, helping keep children out of poverty, and reducing extra steps and paperwork would benefit constituents in every corner of the country, regardless of their political orientation.
Addressing the overly complicated design of the credits to make it easier to assess eligibility would remove administrative burden from low- and middle-income families and the IRS alike as well as improve accuracy. The IRS has already made some progress in relieving the pressure on individuals to parse out tax policy on an annual basis. Responding quickly to the COVID-19 pandemic, the IRS debuted two simplified filing tools in less than two years: 1) the non-filer tool2 on the IRS website to help people who have extremely low or zero income claim their stimulus checks; and 2) the site GetCTC.org3, in partnership with Code for America, to help low-income individuals claim their CTC and third stimulus check, with the opportunity to fill out a full tax return through the existing GetYourRefund.org to receive both the CTC and EITC. Between April and September of 2020, seven million people used the IRS non-filer tool to request their stimulus checks.4 Nearly 190,000 people used GetCTC.org to file tax returns, with nearly 80,000 accepted by the IRS in 2022, while others used GetYourRefund.org to submit a full return and access the EITC.5 These tools simplified access to the CTC and stimulus checks (Economic Impact Payment or Recovery Rebate Credit) and were a huge step in the right direction, but they needed additional refinements to meet the needs of a large number of low-income families, while minimizing fraud.
The Inflation Reduction Act allocated $80 billion to the IRS for improving taxpayer services and operating support, including studying the potential for a free, direct e-file tax return system. Based on lessons learned from the field over the last three years, the recommendations in this paper could improve federal and state governments’ ability to help struggling families access needed tax credits and reduce costly errors by removing painpoints in the process and simplifying the way the credits work.
Citations
- Tax Policy Center, Briefing Book: A Citizen’s Guide to the Fascinating (Though Often Complex) Elements of the U.S. Tax System (Washington, DC: Tax Policy Center at Urban Institute and Brookings Institution, 2020), source.
- Commonly called the non-filer tool or the Enter Payment Info Here Tool by the IRS, this page on the IRS website created in partnership with the Free File Alliance allowed people with extremely low or no income who are not normally required to file taxes to register for the Economic Impact Payments, also known as stimulus checks. The tool closed in November 2020, and after that date, individuals were required to claim their stimulus checks by completing a tax return.
- GetCTC.org was a web-based product developed by Code for America in partnership with the White House, Department of the Treasury, and Internal Revenue Service to allow people who were eligible for the Child Tax Credit but normally earn too little to be required to file taxes to have a simple, streamlined way to prove eligibility and claim their advance Child Tax Credit, as well as the third stimulus check. It also allowed people who were eligible for the Earned Income Tax Credit to instead use Code for America’s Get Your Refund tool to file a full tax return and get both tax credits.
- Internal Revenue Service, IRS Releases State-by-State Breakdown of Nearly 9 Million Non-filers Who Will Be Mailed Letters About Economic Impact Payments (Washington, DC: IRS News Release, 2020), source; Internal Revenue Service, Use IRS Non-Filers: Enter Payment Info Here tool to get Economic Impact Payment: Many low-income, homeless qualify (Washington, DC: IRS News Release, 2020), source.
- Code for America, Details of GetCTC 2022 Usage: Characteristics of GetCTC 2022 Users and Detailed Data on Their Use of The Tool (San Francisco, CA: Code for America, 2023), source.