The expanded and fully refundable child tax credit (CTC) will lift millions of children out of poverty in 2021. But many very low-income children may be left behind because their parents and guardians neither a filed a tax return in recent years nor claimed economic impact payments provided under COVID-19 relief legislation. How can the federal government deliver tax credits to families that are outside the tax system?
The first step is to find the families most at risk of missing out on the CTC. Using data from the US Treasury Department, the Tax Policy Center has developed an interactive tool that identifies the zip codes where eligible families that may not be availing themselves of the expanded CTC reside. Knowing where these kids reside can equip government and non-profit outreach campaigns to tailor resources to the specific characteristics of their communities.
Where are families at risk of missing the CTC?
Even if eligible families are not in the tax system, the Internal Revenue Service may be able to find them using information from other sources. For example, if the child is enrolled in Medicaid and their family is participating in health insurance via the ACA marketplaces, the IRS receives a Form 1095 verifying health insurance coverage.
According to the Treasury Department, there were 2.3 million children under 18 who were listed on the health insurance Form 1095 in 2019 but not claimed on tax returns in tax year 2019 or 2020. Importantly, Treasury’s counts are presented at the zip code level.
Using the Treasury data and information from the Census Bureau’s 2015-2019 American Community Survey, TPC has identified some key characteristics of the 50 locations with the largest number of potentially-eligible families at risk of missing out on the expanded CTC. Those top 50 locations contain about 5 percent of the 2.3 million kids identified by the Treasury data; by comparison, less than 2 percent of all children in the US live in those zip codes.
Of the top 50 zip codes, 27 of them are in New York and 15 are in California. The rest are in Arizona, Georgia, Maryland, New Jersey, and Tennessee. Texas’s omission from the list underscores one of the limitations of the Treasury data. Because Texas has not expanded Medicaid and has the highest share of uninsured children in the US, there are not as many Form 1095s for eligible children. The Treasury data also misses babies born in 2021.
What are the characteristics of the communities with the most families at risk of missing the CTC?
The demographics of the top 50 zip codes are significantly different from the rest of the country.
- Nearly half of the total population in the top 50 zip codes are Hispanic or Latino, compared with 19 percent of the US population. Those zip codes also have disproportionately-higher shares of Asian and Black populations.
- Over a fifth of the total population in these zip codes are immigrants or citizens of a country other than the US, compared with 7 percent overall for the US.
- Poverty and inequality levels are significantly higher in the top 50 zip codes. In two New York zip codes—11212 and 10456 in Brooklyn and the Bronx, respectively—median household income was under $30,000 in 2019, or about half of that of US overall. But not all the top zip codes have low household incomes: in another neighborhood in Brooklyn—11211—median household income was over $80,000.
- The largest numbers of eligible but not availing families are in Lakewood, New Jersey’s 08701 zip code. Over 9,000 children are potentially eligible for the expanded CTC there, but their parents may not have filed tax returns in recent years. Next is Brooklyn’s 11219 zip code, with about 6,000 children. Both neighborhoods are home to large ultra-Orthodox Jewish communities; that’s also the case for Monsey, New York, and a few of the other top 50 zip codes.
How will all eligible families learn about the CTC?
Getting the CTC to families in the top 50 zip codes will be challenging. Hispanic or Latino families, in particular, can face various barriers, including lack of low-cost or free tax filing assistance. Immigrants often face unique challenges when it comes to filing tax returns and are less likely to have heard of the expanded CTC than US-born parents. The public charge rule has also discouraged some immigrants from claiming benefits for fear of adversely affecting their immigration status in the future. In certain ultra-Orthodox Jewish communities, some may not be fluent in English and may have limited access to the Internet.
The White House and advocacy and community organizations have launched large-scale outreach campaigns to get the word out about the expanded CTC and to aid families in claiming the money. TPC’s tool gives outreach coordinators a map to the neighborhoods of families to be reached.
Knowing where these families live provides insight into the characteristics of people in those communities and structural barriers they may face. With that information in hand, government officials and local organizations can design grassroot outreach programs that address the unique needs of communities with large numbers of eligible families who might otherwise miss out on the CTC. Doing so will help lift more children out of poverty.