Under the law, known as the American Rescue Plan, lawmakers with the backing of President Biden approved a sweeping yet temporary expansion of the country’s child tax credit. The government aims to pay parents $3,000 per year for kids between ages 6 to 17, and $3,600 for those under age 6, on a periodic basis — replacing the smaller annual credit that families typically claim on their yearly tax returns.
Democrats have hailed the benefits as historic, predicting it could cut child poverty sharply, especially if lawmakers make the program permanent before it is set to expire at the end of the year. But the Biden administration must first set up and administer the temporary aid, a task that Rettig signaled may be no easy lift for the agency.
With a massive backlog of 24 million tax returns accrued over the past few years — and other stimulus responsibilities on the horizon — Rettig raised the possibility that the IRS may not have the personnel to set up an online “portal” for the new program. The digital hub is supposed to allow Americans to communicate key information with the government, such as changes to their income or marital status, that the IRS would not otherwise know as it determines which families are eligible for payment.
At the same time, the agency’s information technology teams are also assisting the IRS during tax-filing season, which it opted on Wednesday to extend another month past April 15.
“One of the reasons we were not in favor of the extension was we are by statute to launch the portal, if you will, for this by July 1,” Rettig told lawmakers, adding that agency officials now “have one month less to do the development” on the child tax credit portal.
“We intend to do our best to get there,” the IRS commissioner continued. “I am hopeful that I don’t have to come back to the committee to say we’re unable to meet the statutory requirement. We intend to satisfy this challenge.”
Lawmakers also hoped the IRS would pay out these new benefits on a monthly basis, though the $1.9 trillion stimulus gave the agency flexibility to do so periodically. Asked about the timeline, Rettig said it “might be a challenge to get into monthly right out of the box.”
“We’re focused on trying to get these payments out to people in a meaningful manner, in a meaningful time frame,” he said. “And if that time frame might change in some manner, I commit to getting back to you and letting you know.”
Rettig’s comments Thursday illustrate the massive undertaking that awaits the Biden administration as it seeks to bring online one of the largest rescue packages in U.S. history. The government must distribute aid to states and localities, send funds to schools and public health agencies in need, and dispatch another round of stimulus payments, all the while rethinking elements of the tax code — right in the middle of a still-evolving pandemic.
“The success of that program is significantly dependent on how the Internet Revenue Service implements it,” said Rep. Lloyd Doggett (D-Tex.), who asked the IRS about implementing the child tax credit at the hearing.
To meet the task, Congress authorized nearly $2 billion to help the IRS hire additional staff members and modernize its aging tech infrastructure after a decade of budget cuts largely proffered by Republicans. But the agency may not be able to take full advantage of those dollars in time for it to roll out key stimulus programs, particularly given the tight timelines Congress envisioned under the American Rescue Plan.
Along with the child tax credit, the stimulus also granted some unemployed Americans a major reprieve, granting them a tax break on roughly $10,000 in benefits. The IRS also must implement that program, creating a tricky situation for the agency because some jobless Americans may have filed their taxes before Congress adopted the law.
On Thursday, Rettig said the agency is close to announcing a way for the government to adjust these filings on workers’ behalf without them having to file amended returns, potentially easing the burden.
“We hope to be able to announce that in the neat future,” he said.