For the first time in years, Diana Thompson spent both her summer and holiday season with her two kids — instead of scrambling to make ends meet by picking up extra shifts and orders as a delivery driver as she had in years past.
The Weatherford mother also was able to afford much-needed car repairs, new school clothes and a joint birthday party in September for her 14-year-old and 9-year-old kids.
Thompson is one of millions of parents who received half of their child tax credit in monthly payments over the last six months, a one-time expansion authorized by the American Rescue Plan to provide parents relief amid the COVID-19 pandemic.
“Before (the payments), I had to pretty much work three different places … I was constantly on my phone looking for orders through Instacart and I was always filling out an application for another job,” she said. “When those child tax credits came in, I didn’t have to worry about that as much. I could rely on Instacart … to carry me through. It was awesome.”
But after a proposal that would have extended the payments stalled in Congress, the last monthly installment came in December. Thompson is now looking to find ways to make up the money that came from those payments each month, and still be there for her kids.
“My daughter has been watching my son a lot, so I can go out and make some money,” she said. “I am back to filling out applications and looking for other jobs and working.”
The summer months, when kids are out of school — and shopping for the next year — are what Thompson said she is most worried about, adding that the payments provided a great relief over the last several months.
Advanced child tax credits saved families from poverty
Advocates and researchers say the six months of expanded payments were transformational for families across the U.S., especially those on the brink of poverty.
The Center on Poverty and Social Policy at Columbia University found that the first child tax credit payment in July 2021 reduced the monthly child poverty rate by 26% — keeping 3 million children from falling below the poverty line, with that number increasing to 3.8 million by November as the IRS reached more parents.
“Several economists agree that programs like this help to reduce childhood poverty,” said Peggy Jimenez, a clinical assistant professor of accounting at the University of North Texas. “We saw families be able to use this for various childcare-related things and essential expenses as inflation has gone up.”
According to an analysis of Census survey data by the Center on Budget and Policy Priorities, a progressive think-tank, 87% of Texas households with incomes below $35,000 used their child tax credit payment for basic needs like food, rent and mortgages, with 93% using the payments for basic needs and education costs.
With the end of the credits, researchers say the impacts on childhood poverty could be reversed.
“The theory would suggest that those child tax credit payments, could have helped some families combat the effects of poverty,” Jimenez said. “And for those families, they’re going to have to figure out how to make this work in another way. The real concern for that comes down to childcare, food and housing. And if these payments were being used to cover child care, food or housing, then they’re gonna have to figure out another way to make it work.”
Gina Hurd, who mentors families in need through her own nonprofit Queen Esther Outreach and the Tarrant County nonprofit Pathfinders, said she has seen how the payments have pulled families back from the brink of homelessness over the last six months.
“I’ve seen a lot of people get back on their feet and a lot of people stay from being evicted,” she said.
Hurd said that housing prices and availability have gotten worse over the course of the pandemic — adding to the stress of mothers and families as the payments come to an end.
“Somebody that’s on housing already, who gets section eight, who gets supplements for daycare and housing, they will be fine,” she said. ”But the ones that don’t meet it ...are the ones that are gonna hurt, the one that doesn’t qualify for housing, because she’s $2 over you know, $5 over.”
Hurd also said that some parents who have been receiving the payments don’t understand that they will be receiving a smaller tax credit at the end of the year, since half of the credit was doled out through the monthly payments.
“Some people won’t realize it, that they aren’t going to get as much as they thought at the end of the year, but it is beneficial,” she said. “Sustaining is more than a month of enjoyment.”
Hurd and other advocates say that continued monthly dispersal similar to the last six months would help those in need budget, and sustain changes that have the potential to lift them out of poverty.
The importance of understanding how to file and take advantage of the tax credits is essential to avoid delaying payments, or owing money, advocates say.
RAISE Texas, a coalition of nonprofits, financial institutions, public agencies, colleges and universities, and community leaders had held several events to educate parents on how take advantage of the credit.
“If you didn’t get it automatically from the 2020 tax return you filed, you had to go through some steps and jump through some hoops on the IRS website to be able to claim that credit,” said Elizabeth Colvin, the executive director of RAISE Texas. “So we wanted to make sure we connected people with local help to be able to do that.”
In filing taxes this year, parents will have to pay extra attention to the information they include to avoid delays.
Accurate reporting key to receive full tax return
As parents look to file taxes after receiving payments during any of the last six months, they will receive a letter detailing exactly how much they received, information that is key to include when submitting their taxes in order to get their full refund, including the remainder of their credit.
According to the IRS, the letter includes the total amount of advance child tax credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. People should keep this and any other IRS letters about advance child tax credit payments with their tax records.
Families who received advance payments need to file a 2021 tax return and compare the advance payments they received in 2021 with the amount of the child tax credit they can properly claim on their 2021 tax return, according to the IRS.
If changes occurred in the family over the year, like the addition of a new child, that will have to be updated in order to claim the tax credit for that child.
Cities and nonprofits across DFW provide free income tax assistance to people who make $60,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns.
Jeanette Hopkins, a Volunteer Income Tax Assistance Coordinator for the City of Fort Worth, said it is essential that families accurately report the amount they have received in order to process their tax return and avoid delays.
“So far, parents are saying they haven’t received that letter yet,” Hopkins said. “Then, of course, they can’t remember how much the payments were. That is going to be troublesome for taxpayers because we need an accurate amount, (because) an inaccurate amount delays their refund, by six to eight weeks, maybe potentially up to 12 weeks.”
Parents in Fort Worth can make an appointment for assistance online, or use other assistance programs like Myfreetaxes.com, which is run by United Way Worldwide and Getyourrefund.org, which is a free online service from Code for America that partners with IRS-certified volunteers and VITA sites.
If parents have online access to IRS.gov, they can log in to track the amount of payments they have received, but not all families have access or remember their passwords, Hopkins said.
Hopkins, a parent herself, said the advance payments were key over the last six months — as inflation and pandemic-related costs complicated finances.
“I only received $250, but it made a difference,” she said. “I was definitely amazed; you wouldn’t think a small amount like that would make a difference, but it did.”