Payment pending

Coleman Kimbell isn’t sure where he, his wife, and his two daughters will sleep next month.

The family recently moved from Texas to Delta County, Colo. Moving expenses wore down their savings, a tight housing market drove the family to a pricey rental, and a bout of COVID-19 kept Kimbell home from his truck driver job for six weeks, quickly burning through his paid time off. Kimbell’s daughter caught COVID-19 first, and he wanted to return to work wearing a mask and staying isolated in the truck cab, but the company said no. As symptoms faded, Kimbell kept testing positive and couldn’t return to work until he had a doctor’s note certifying he wasn’t contagious. The company did front him an extra 80 hours of paid time off, which he’ll have to repay if he quits or gets fired.

As a parent of two kids under age 6 who made about $37,000 last year, Kimbell qualifies for $600 each month from the Internal Revenue Service as part of the Child Tax Credit (CTC). The July and August payments helped, and Kimbell set up bill payments from the account where he expected another payment to land on Sept. 15.

On Sept. 13, Kimbell checked his account in the CTC online dashboard. His status had switched from “eligible” to “pending.” The September check never arrived. The bills hit and along with them came overdraft fees: Kimbell’s bank account was at -$967 by mid-October. When he called the IRS, the representative said if he missed checks he could wait until tax time and claim the credit then. Kimbell couldn’t wait until next April: His landlord has given him a 30-day eviction notice.

“My oldest is 5 years old,” Kimbell said. “She’s always had a roof over her head. … In 30 days, what’s going to happen?”

This year’s expansion of the CTC, which made more families eligible for larger payments, has faced criticism from opponents for possibly discouraging parents from working in an economy already fighting a labor shortage. Meanwhile, proponents say the monthly payments inject some stability into families’ finances. The first installment alone lifted about 3 million children out of poverty, cutting the child poverty rate by 25 percent, according to a Columbia University study. (The study’s finding is based on the number of checks the IRS sent in the first month, even though not all checks made it to the families they were supposed to.)

Regardless of the policy’s wisdom, many parents have instead found themselves mired in glitches, unsure if they’ll receive next month’s check. They’re not getting answers from the IRS, which has admitted problems but doesn’t know how many families are missing checks or even how many are eligible. With the IRS unable to provide reliable numbers, it’s unclear how many families are slipping through the cracks. The expanded CTC’s future is still up for debate in Congress, but its rocky rollout highlights the challenges of using the IRS to distribute government benefits.

THE CTC HAS EXISTED since 1997, but in March Congress passed the American Rescue Plan, which expanded the credit from $2,000 per child to $3,000 or $3,600 per child, depending on the child’s age. The credit phases out in stages as household income increases, starting at $150,000 combined income for married couples and $112,500 for single, head-of-household parents. The American Rescue Plan also made the credit fully refundable, meaning even low or no-­income families who don’t pay taxes can get the full amount.

Half of each family’s CTC will arrive after tax time as usual, but the IRS is distributing the other half in monthly checks delivered from July through December. When the first checks were sent in July, Sen. Cory Booker, D-N.J., said, “This is one of the most historic days in American history, and I’m not being hyperbolic.”

Supporters say monthly payments help families keep up with regular bills and necessities better than a yearly chunk of cash. Chuck Marr, a tax policy expert at the Center on Budget and Policy Priorities, summarized the argument: “Struggling families need to buy diapers, food, and school clothes for their kids and to pay rent throughout the year.”

Ideally, monthly payments will prevent common side effects of poverty like frequent moves and chronic stress, which hurt kids’ mental health and school performance, setting them up for poorer outcomes even in adulthood.

FOR MANY FAMILIES, payment gaps like what Coleman Kimbell experienced are no big deal. Val Soto, a Delaware mom of three, wanted to go back-to-school shopping at Target instead of a thrift store and get some Halloween pencils and stickers for her son’s school class. Amending her tax return slowed processing on her CTC payments, but she said missing checks has been more of an inconvenience than a crisis.

For others, the loss of the credit payments has a bigger impact. Angelette Jones, a Texas college student and single mom of two, lost her nannying job during the pandemic. She said she’s been able to work around missing payments, cobbling together food stamps, help from her mom, and scholarship money to support her family. But some solutions will cost her: She planned to buy her kids’ school uniforms with the CTC payment and instead used her credit card, where the debt will collect interest.

When we spoke in August, Jones didn’t know why her payments weren’t coming. She theorized the IRS was having trouble updating its system to send payments to tax filers with low or no income like her—the new “fully refundable” aspect of the expanded CTC. Waiting on hold with the IRS for four hours produced no answers.

The Treasury Department used health insurance records to estimate that 2.3 million children may not be getting the CTC because they are not registered with the IRS. A Center on Budget and Policy Priorities study estimated that number might be closer to 4 million at risk of missing out. Those estimates include children whose parents don’t have a Social Security number or an Individual Taxpayer Identification Number (ITIN), whose parents never filed taxes due to low or no income, and newborns who don’t yet have Social Security numbers.

Parents like Kimbell, Soto, and Jones have gathered in Facebook groups to swap information about problems getting payments. One such group has more than 16,000 members, another more than 22,000. Members post about checks sent to years-old addresses, paper checks instead of direct deposits, mysterious changes from “eligible” to “pending,” overpayments and underpayments, and gaps between the amount promised on the online portal and the number on their checks. Many have called the IRS over and over but gotten no answers.

That may be because the IRS doesn’t have the answers parents are looking for. IRS representatives said the agency doesn’t have numbers available on how many families who are eligible and enrolled for the CTC have missed a check. People who don’t file taxes, or non-filers, have until Nov. 15 to sign up for monthly payments, so the IRS does not yet know how many will do so. A representative couldn’t tell me how many have signed up so far.

When Tiffany Rae Wilson, a single mom of five in Las Vegas, called the IRS asking why her account had switched to “pending,” a representative responded that the IRS needed to review her tax return. After many calls, she said, another IRS employee told her it actually switched because of a glitch affecting about 400,000 accounts. (The IRS didn’t respond to my requests for confirmation of that number.)

The IRS says it has sent payments to more than 30 million households each month, benefiting about 60 million children. But a University of Michigan survey of eligible low-income families found that 1 in 10 reported they hadn’t received a CTC payment by September. In a September U.S. Census Bureau Household Pulse survey, 35 percent of households likely eligible for CTC payments reported they hadn’t received one in the last month. The Household Pulse survey has limitations that could also skew its data, including unusually high numbers of respondents leaving questions blank. And it didn’t ask about opting out of payments, divorced parents who would settle up at tax time, and other unique cases where otherwise eligible parents wouldn’t get checks. But its results still suggest that a substantial number of eligible parents aren’t receiving the monthly payments touted as game-changing. And the IRS couldn’t refute that suggestion—a representative said the agency doesn’t have numbers available on how many families have missed a check despite being eligible and enrolled for the CTC.

That has consequences for families told by politicians they could count on monthly payments. Genetra Quick, a mother of five daughters, has been an Uber and Uber Eats driver for three years. Her husband is waiting on a disability claim for his chronic pancreatitis. Business slowed during the pandemic, and her family moved to Smyrna, Ga., near Atlanta. The Quicks struggled to find an apartment and instead checked into an extended stay hotel, which costs $540 a week. Quick was also renting a car for $250 a week, which ate up her Uber income. Her first two CTC payments went to moving costs, room payments, and the start of a down payment on a car.

Then Quick’s CTC status switched to “pending” and September’s payment never came. Her car was repossessed. Family members and friends have helped with some expenses, and Quick found a church willing to cover a week of hotel costs. She’s called rental assistance charities, but they’re already overloaded.

October’s CTC payment did arrive, and September’s missed payment will be split among the remaining checks. But Quick hasn’t found a new car yet, so she can’t drive for Uber. She’s looking for jobs within walking distances or a bus ride, but so far, no success—a gas station night shift role went to another applicant. And she’s no longer planning for CTC money, especially since she’s seen other parents still having issues getting payments. “No one knows a definite reason for what’s going on,” Quick said.

The IRS website tells taxpayers not to call about the Child Tax Credit: Agents who answer phones won’t be able to look up individual accounts or give any answers. Parents call anyway and in the Facebook groups swap tips on how to get past phone trees—one posted a phone number with the advice to hang up if a woman answers and call back until a man answers (with no explanation). Parents post tax return and employment details, searching for common factors that might be causing problems. Others tag media outlets in posts, hoping reporters will get their questions answered. Some have called their congressmembers. While lawmakers have trumpeted how the CTC helps poor families, there’s been little talk of those struggling to get the payments. While parents wait, their frustration and confusion fester.

IT TAKES TIME TO IRON OUT the wrinkles in a new program, said Cassandra Robertson, a researcher at the think tank New America. The switch from yearly to monthly CTC payments happened fast, and while the IRS does distribute some other government benefits, that’s not its primary mission. Robertson said that splitting the expanded credit in two, half distributed monthly with half in reserve until tax time, protects taxpayers from some IRS error—if the agency overpays in their monthly checks, it can cut a smaller check to make up for it at tax time instead of sending parents a surprise bill.

Robertson said she’s more worried about non-filers, people whose income is low enough that they don’t normally file taxes. Without tax returns on file, the IRS can’t automatically enroll them for CTC payments. But, Robertson noted, many non-filers did file to receive last year’s stimulus payments, so they’re also registered for the CTC. For the rest, the IRS created an online tool that helps them file a simplified tax return.

So far, the CTC expansion only applies to the 2021 tax year. President Joe Biden and Democratic lawmakers want to use the $3.5 trillion budget reconciliation package to extend it until 2024 or 2025, with the hope of making it permanent. But Sen. Joe Manchin, D-W.Va., and Sen. Kyrsten Sinema, D-Ariz., insist the package should only cost about $1.5 trillion. With uniform opposition from Republicans and an evenly split Senate, Democrats need both senators’ votes to pass the package. Democrats have other expensive priorities on their list, so they may sacrifice the CTC expansion to keep Medicare expansions or subsidized child care.

Manchin has also suggested adding work requirements to the credit and ending eligibility for families that make more than $60,000 a year, which would shrink the number of people eligible and cut costs. It would also comfort critics worried that the current CTC policy will encourage parents to work fewer hours, counting on the payments for support.

That outcome would require a long-term extension and reliable payments. In Colorado, Kimbell has no plans to cut back his overtime hours. Right now, he’s having paychecks deposited to a cash card from Walmart so the overdraft fees on his bank account won’t swallow the money before he can buy groceries and gas.

He’s still scrambling for ways to pay rent, asking anyone he can think of for help, from relatives to a Mormon church to an activist hacker group. But he’s no longer calling the IRS as much. “Nobody, nobody answers,” Kimbell said. “Honestly, it’s not fair to my kids. My kids shouldn’t be the ones suffering. If it was just me, I’d survive.”