What to Know About Tax Day

Today is the deadline to file your 2021 federal income taxes. While we are all familiar with the Internal Revenue Service (IRS) in its tax-collecting capacity, a lesser known function of the IRS over the last several decades has been its part in the federal social safety net. Since the COVID-19 pandemic jumpstarted new social policies aimed at getting dollars to the families who need them the most, New America’s New Practice Lab has been studying the expanding role of the IRS as not only a tax collector, but a benefits administrator. Here are four facts for Tax Day:

1. The IRS is the nation’s largest administrator of benefits responsible for distributing money that has lifted millions families out of poverty. With its responsibility for the Earned Income Tax Credit (EITC), the expanded Child Tax Credit (CTC), and three rounds of stimulus checks during the pandemic, the IRS today is arguably the single-most critical benefits administrator in the nation for workers and families. But accessing IRS benefits remains too difficult for many low-income families. Millions of eligible households go without assistance they urgently need, and millions more struggle with bureaucratic processes or lose large portions of their payments to intermediaries.

Read more: "The IRS as a Benefits Administrator" by Gabriel Zucker, Cassandra Robertson, and Nina Olson

2. About 10 percent of the population does not earn enough income to file a tax return, which is a primary reason that an estimated one-in-five EITC-eligible families do not claim a CTC. Among people who don’t file taxes, there is a wide array of logistical barriers that stop them from accessing benefits for which they are entitled. New America researchers interviewed a dozen non-filers about their experiences navigating IRS systems.

Read more: "Talking to Non-Filers: Evidence from Qualitative Research with Families Who Don't Regularly File Taxes" by Gabriel Zucker and Lindsey Wagner

3. In 2020, the IRS established a “non-filer portal” that provided a simplified format for people who hadn’t filed income taxes in previous years to claim their stimulus checks. The IRS could implement a similar system for claiming the EITC. A handful of improvements would make the system even more effective: the portal should be optimized for mobile devices, as almost 20 percent of low-income people only access the Internet via smartphones; the portal should be offered in more languages than just English and Spanish; the portal should be written in plain language rather than legalese; and the portal should be clearer about which households are eligible to use it.

Read more: "Strategies for Increasing Uptake of the Earned Income Tax Credit" by Cassandra Robertson, Gabriel Zucker, and Nina Olson

4. State agencies can also play an important role in reaching the populations that are eligible for the EITC, but less likely to claim it. These households tend to be lower-income, less-educated, Latinx, and non-English speaking. For example, in New York, research with the Department of Taxation and Finance found that communications with potential recipients of the earned income credit could be improved with: clear formatting, customized correspondence, fewer requests for information, and offering translations in more languages.

Read more: "Improving Service Delivery in EITC for New Yorkers" by Alberto Rodríguez, Navya Kaur, Imani Nichols, Tenzin Namdol, and Sudeepti Rachakonda

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