IRS Set to Deliver Advance Monthly Payments: Needs Ability to Update Bank Information

Starting on July 15, the IRS will begin distributing a monthly Child Tax Credit payment to at least 39 million families, or almost 90 percent of families with children. The agency has created a new online portal to help families claim the correct amount. But the portal may have no way for claimants to add crucial data: an updated address and direct deposit information. Only by including those data in its portal can the IRS be sure eligible households actually receive their monthly payments. 

The CTC, which was temporarily enhanced in the American Rescue Plan, provides annual benefits of up to $3,600 per child under age 6 and $3,000 per child ages 6 – 17. And for the first time it makes the credit available to families with very low incomes. An online portal will allow families who did not file a 2019 or 2020 tax return to claim the CTC. It will also let them update children’s custody arrangements if children have moved since last reported on a tax return or add babies born since they last filed a return.

Because not all newly-eligible families have enough income to require filing a tax return, the IRS could miss them when it starts making monthly payments. A recent survey of Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) recipients by Propel suggests that about 15 percent of these families with children did not file a tax return in either 2019 or 2020. (Propel runs the Fresh EBT app that allows about 4 million SNAP households to manage their SNAP benefits.)

And just over 20 percent of SNAP recipients in the Propel survey reported they had a baby in 2021. Making sure these children make it into IRS’s records will be critical to the success of the newly expanded CTC. The IRS portal will help these and other low-income families receive the monthly payments. Those who do not use the portal still can claim benefits, but not until they file their 2021 tax return in early 2022.

But without updated address and direct deposit information, many families won’t get their monthly benefits even if they have correctly claimed the credit. The American Rescue Plan does not require the IRS to allow families to update where their payments should be delivered, but low-income families need this opportunity.

Propel found that 81 percent of Fresh EBT users thought updating bank account information should be included in the portal. About one-third wanted the IRS to send their CTC payment to an account other than the one where they received their tax refund, and one-fifth said they had opened a new primary bank account within the last year. One-fifth of survey respondents said they received their 2020 tax refund either on a prepaid debit card from a tax preparer or by check.

The IRS deserves kudos for quickly building a portal to help families with children claim the correct CTC payment. The IRS has signaled it also will provide some payments via debit card, an option that will be helpful to those without a bank account. Now the IRS needs to make sure these and other families can update their addresses and direct deposit information so they can get the money they deserve.

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