Harris encourages parents owing no federal taxes to claim $3,000 child tax 'credit'

Vice President Kamala Harris is encouraging individuals and couples not earning any income or owing any taxes to claim an expanded $3,000 to $3,600 child tax "credit."

"We've also expanded the credit to more families than ever before, so now low-income families or parents with no income will also receive this credit for their children because before it was a tax credit with the assumption that you get the credit if you had an income and had paid enough taxes to get the credit from what you had paid," Harris said on Friday at a child care center in Washington, D.C.

"If we agree that parents need a little extra help, then why would we differentiate between the parents that have an income high enough to pay taxes and those who don't?" she asked. "That's not logical as a matter of fact, so that's why we extended it."

Harris said individuals and couples filing jointly will be eligible to receive the credit monthly under a new system instead of at the end of the year.

"Folks have got to pay the bills every month, so let's make it actually real," she said. "The checks will start dropping in July, that's part of the announcement today, to remind people and let them know."

House Speaker Nancy Pelosi is seeking to make the benefit permanent.

Harris mentioned that Monday, June 21 will be a "Child Tax Credit Awareness Day" when the White House will join with local community organizations, faith-based groups and local elected officials to promote "how folks can receive the credit."

President Joe Biden's $1.9 trillion American Rescue Plan Act permitted people who do not earn an income and do not pay income taxes to claim the credit for the first time. Under the new law, which Biden signed in March, the first $10,200 of an individual's unemployment payments are tax exempt.  

The IRS has advised the public that "filing a 2020 tax return, even if you don't have to, could put money in your pocket."

According to a page on the official IRS website, "while people with income under a certain amount aren't required to file a tax return because they won't owe any tax, if you qualify for certain tax credits or already paid some federal income tax, the IRS might owe you a refund that you can only get by filing a return."

Turbotax advises individuals that "any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork."

Biden's American Rescue Plan raised the child tax credit from $1,400 to $3,000 and $3,600, depending on the age of the child.

"Now it also applies to children up to the age of 17," Harris said. "So we increased the age."

The child tax credit has been linked to billions of dollars of fraud in the past. In some cases, parents file separately and claim the same child on both returns to receive the credit. In other cases, fraudsters file returns with deceased individuals' social security numbers to collect the child tax credit and other tax benefits. 

In 2014, the Treasury inspector general for tax administration reported that undocumented workers were a major source of fraudulent activity related to the child tax credit.

According to an IG report, the IRS paid approximately $5.9 billion in "improper payments" for fiscal year 2013, which represented about 25-30% of total payments. The IRS estimated that 12% ($4.5 billion) of Child Tax Credit payments, $39.1 billion, were considered improper in FY 2020, according a recent IG report. 

"Generally speaking, most of the error rates we see with refundable credits like the CTC and the [Earned Income Tax Credit] are related to mistakes filers make when claiming children who either are not eligible for a credit or were incorrectly claimed when they could be claimed by another filer," said Garrett Watson, an expert at the Tax Foundation. "This is a good reason to watch the upcoming advanced CTC payments closely, as there may be mistakes made by filers that could be associated with the monthly payments. Overpayments may also mean filers could be hit with a surprise tax bill next spring, too."

The Biden American Rescue Plan also expanded the Earned Income Tax Credit to additional tax filers. In 2019, the IRS estimated that about a quarter of EITC payments were made in error.