Conclusion

The CTC and EITC have historically helped lift families out of poverty and have been a lifeline to struggling Americans. However, the process to claim these credits is outdated, unnecessarily complicated, and sometimes scary. This can deter low-income families who need these credits from claiming them. The federal government and IRS could make it much simpler for people to file taxes and access tax credits they are owed by easing administrative processes and simplifying eligibility requirements.

In addition to making filing processes simpler, streamlining eligibility for the CTC and EITC is one key in addressing these issues. Parents and caregivers are confused by the complicated rules, and not knowing how much they might owe or receive makes budgeting difficult. Taking a middle-road approach that includes a separate worker and child tax credit that are easier to understand and claim is one of the best ways to address this issue. Various researchers and advocates have offered proposals to expand and simplify the eligibility for the EITC and CTC, or even combine aspects of the two credits, and further research is necessary to weigh the costs and benefits of these proposals. Our research points to the need to seriously explore this option, in addition to using the best technology and data systems to help make the process of filing taxes and claiming much deserved tax credits a simpler process for a majority of American families through a greatly streamlined approach.

Federal and state governments already collect the information they need to automatically process returns for nearly half of all Americans. In addition, the accuracy of these types of prepopulated returns is higher for lower-income people due to the lower number of deductions they claim.¹ Using such an approach has been shown in Europe and elsewhere to improve accuracy of returns—and, as a result, the cost of administration.² That means wading through tax forms and worrying about claiming the wrong tax credit is entirely unnecessary for millions of Americans, particularly lower income Americans who often lack the resources and/or time to do so.

Simplifying the tax code and tax filing processes would not only save families time, money, and the stress of fearing they have made a mistake, but could also save tax revenue as tax credits and refunds will go to those entitled to them and fewer IRS resources will be used addressing tax-filing mistakes. The result is a win-win for the American public.