White House Promotes Use of Tax Credits for Parents and Employer-Paid Leave

New sign-up tool aims to help low-income families receive the Child Tax Credit

Stephen Miller, CEBS By Stephen Miller, CEBS June 21, 2021
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White House Promotes Use of Tax Credits for Parents and Employer-Paid Leave

The Biden administration designated June 21 as Child Tax Credit Awareness Day, to notify parents about the American Rescue Plan Act's (ARPA's) expansion of the Child Tax Credit (CTC).

The administration is encouraging organizations that advocate on behalf of children to help low-income families, which may not be required to file taxes, to use a new CTC sign-up tool.

The White House also wants to raise awareness of paid-leave tax credits for employers.

Temporary CTC Expansion

The ARPA, signed into law on March 11, expanded the CTC for tax year 2021 only. Specifically, the legislation:

  • Made the CTC fully refundable, so low-income households can receive the full credit benefit regardless of how much they owe on their 2021 taxes. Previously, taxpayers must have earned income more than $2,500 to claim the CTC.
  • Increased the amount of the CTC from $2,000, raising it to $3,600 for children under age 6 and to $3,000 for other children under age 18. There is no cap on the total credit amount that a tax filer with multiple children can claim.
  • Expanded the CTC's scope to cover children ages 17 and younger, as opposed to 16 and younger.
  • Allowed those eligible for a 2021 CTC to receive advance payments of the credit, which the IRS and the Bureau of the Fiscal Service will make through periodic payments from July 1 through Dec. 31, 2021. This allows families to receive financial assistance immediately rather than waiting until the 2022 tax filing season.

The ARPA also extended CTC access to residents of Puerto Rico and the U.S. Territories.

In 2022, the credit is set to revert to its prior-ARPA levels, although the Biden administration has called for extending the relief measures and congressional Democrats would like to make the expansion of the credit permanent.

"These measures will help parents by helping them with the costs of raising children—measures that experts project could contribute to cutting child poverty in half," according to the White House announcement. "They will also help defray the costs of child care, provide more child care options, and support return to work for those who have lost their jobs or income—especially mothers."

Among GOP critics of the enhanced credit, U.S. Senators Marco Rubio, R-Fla., and Mike Lee, R-Utah, released a joint statement when CTC expansion was being debated, saying they "do not support turning the Child Tax Credit into what has been called a ‘child allowance,’ paid out as a universal basic income to all parents. That is not tax relief for working parents; it is welfare assistance."

New CTC Guidance

In preparation for CTC Awareness Day, the IRS in June posted new FAQs on receiving advance CTC payments. For instance, the guidance states that parents are eligible to receive advance CTC payments based on their 2020 or 2019 tax returns, and that generally they will receive those payments automatically without needing to take any action.

However, if they have not filed a 2020 or 2019 tax return, parents must sign up to receive CTC payments for those years.

"Even if you have $0 in income, you can receive advance Child Tax Credit payments if you are eligible," the FAQs state.

Paid-Leave Tax Credit

In June, the IRS also released FAQ guidance for the ARPA's paid-leave tax credit. The advanceable, refundable tax credit offsets the cost for employers who voluntarily provide eligible employees with paid sick or family leave, either for the employee's own health needs or to care for family members.

Employers with fewer than 500 employees and certain government employers may receive up to $17,110 to provide employees with up to 10 days of paid sick leave and up to 12 weeks of paid family leave, from April 1 through Sept. 30, 2021. Certain self-employed people in similar circumstances are entitled to similar credits.

According to the Small Business Administration, roughly 6 million businesses and more than 30 million workers are eligible for this credit, which can be claimed for employees who take time off because they are:

  • Exposed to COVID-19 or experiencing symptoms of COVID-19 and seeking a diagnosis, or caring for someone who has been exposed to COVID-19 or is experiencing COVID-19 symptoms.
  • Caring for a child whose school or child care has been closed or is unavailable due to COVID-19.
  • Getting a COVID-19 vaccine or recovering from one.

New Legislation Sought

As part of its long-term agenda to expand federal financial assistance for families, the Biden administration has called for new legislation to make permanent the ARPA-authorized expansion of CTC eligibility and the increased credit amount. In addition, the administration supports legislation to guarantee that low- and middle-income families spend no more than 7 percent of their income on child care for young children, along with federal spending to build and upgrade child care facilities, and to train child care workers.

The administration also advocates for a national comprehensive paid family and medical leave program available to workers regardless of employer size, sector or type of employment.

"Lack of high-quality, affordable child care can make it logistically difficult for parents to work," according to the White House announcement. "Indeed, many parents—particularly mothers—report that they work fewer hours than they would prefer or need to in order to care for their young children. For some parents there is no choice but to find outside care if they want or need to work."

[Related SHRM article: Bipartisan Paid-Leave Plan Uses Child Tax Credit to Fund Time Off]


Too Many Credits?

A May 27 study by analysts at The Brookings Institute, while supporting enhanced federal assistance to families, noted that the administration is currently calling for expansion of the CTC, the Earned Income Tax Credit (EITC), and the Child and Dependent Care Tax Credit (CDCTC).

"The child tax credits as currently proposed overlap with each other and impose unnecessary administrative burdens on families," according to The Brookings Institute Senior Fellow Isabel V. Sawhill, and Morgan Welch, senior research assistant project coordinator.

Instead, they advised that "expanding the EITC while making the earlier CTC level of $2,000 per child fully refundable and permanent, and eliminating the CDCTC entirely would free up spending to allow us to invest in long-lasting changes, such as universal [pre-kindergarten], child health and nutrition, a better child care and teacher work force, afterschool programs, and the like."


New Online Tools

  • The Child Tax Credit Update Portal allows families to verify their eligibility for the payments and, if they choose, to unenroll or opt out from receiving the monthly payments so they can receive a lump sum when they file their tax return next year.
  • For families that don't normally file an income tax return, an easy option is to register for these advance payments using the new Non-filer Sign-up Tool, introduced recently and available on IRS.gov. Among other things, the tool asks users to supply current bank information, along with key details about themselves and their qualifying children. The tool then automatically fills in a very basic 2020 federal income tax return that is electronically sent to the IRS.
  • Before filing a return or using the Non-filer Sign-up Tool, families unsure of whether they qualify for either the credit or the advance payments may want to check out another new tool—the Child Tax Credit Eligibility Assistant. By answering a series of questions, the tool helps people determine if they qualify for the credit and the payments.


[Want to learn more about benefits and tax breaks? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]

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