Families With Low Incomes and the Child Tax Credit: Who Is Still Missing Out?
Summary
A December 2021 brief by Natasha Pilkauskas and Katherine Michelmore, titled Families With Low Incomes and the Child Tax Credit: Who Is Still Missing Out?, reports results of a Propel survey of very low-income families conducted in the first two weeks of November, with over 6,000 respondents. It states that 68% of families with very low incomes got the October Child Tax Credit payment, that 4% had filed and were awaiting payment, that 7% did not receive it for valid reasons, and that 21% did not receive it for other reasons. It reports that employed parents and families with at least $500 of monthly earnings were substantially more likely to receive the October payment. It also reports that Hispanic parents and those who took the survey in Spanish were much less likely to have received it.
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“Families With Low Incomes and the Child Tax Credit: Who Is Still Missing Out?”
Original at sites.fordschool.umich.edu. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/michelmore-k/
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December 2021
FAMILIES WITH LOW INCOMES AND THE CHILD TAX CREDIT:
WHO IS STILL MISSING OUT?
By Natasha Pilkauskas and Katherine Michelmore
INTRODUCTION Assistance Program (SNAP) benefits. Families in our
study have very low incomes, making on average a
Since July, the vast majority of families with children little over $10,000 per year, and many (about 30%) are
under 18 have been receiving a monthly payment unemployed. By focusing on a population of parents
from the Internal Revenue Service (IRS) as part of with low incomes, this brief focuses on CTC receipt
the temporarily expanded Child Tax Credit (CTC) among a group that is particularly likely to be at risk
included in the American Rescue Plan Act (ARPA). of not receiving payments. We highlight new findings
The expanded CTC is much larger than the previous regarding receipt of the tax credit among a very low-
version, providing families with an annual credit worth income population, building on findings reported in an
$3,600 per child under age 6 and $3,000 per child aged earlier brief.
6 to 17.1 Families are receiving half the total tax credit
as monthly payments ($250-$300/child) between July
and December this year, with the remainder of the
credit paid out after parents file their 2021 taxes. KEY FINDINGS
The current policy is distinct from other tax credits • Sixty-eight percent of families with very low
in that it is paid monthly and available for families incomes got the October Child Tax Credit (CTC)
even if they have no earnings, similar to monthly child payment, a rate of receipt that is comparable to
allowances available in many Western nations. The the August and September payments.
goal of the expanded CTC, and similar programs in
other countries, is to help parents manage the added • Although a total of 32% of families with very
costs of raising a child to better ensure healthy child low incomes did not receive the October CTC
development. Because this credit goes to families with payment, 4% had filed for the credit but were
little or no earnings, it has the potential to dramatically awaiting a payment, and another 7% reported
reduce child poverty. In fact, estimates suggest the not receiving the credit for “valid” reasons,
CTC expansion could reduce child poverty by as much such as opting to get the lump sum payment or
as half2 and that the first few months of the credit have another parent receiving the credit. Thus, about
already lifted 3.5 million children out of poverty.3 1 in 5 eligible parents (21%) did not receive the
October CTC payment for other reasons.
However, the full anti-poverty impact of the expanded
CTC will only be realized if all eligible families receive • Employed parents and families with at least
their payments. Although the IRS reported that 60 $500 of monthly earnings were substantially
million children received the CTC (or 90% of those more likely to receive the October CTC than
eligible to receive the credit), millions of children are unemployed parents and families with little or no
still not benefiting from the CTC. In this brief, we try to monthly earnings, suggesting that the expanded
better understand which children are still not receiving CTC is still missing the most vulnerable families.
the monthly benefit.
• Hispanic parents and those who took our
To examine this question, Poverty Solutions partnered survey in Spanish were much less likely to have
with Propel, creators of the Providers app (formerly received the October CTC, despite relatively high
Fresh EBT), which helps more than 5 million low- rates of tax filing, suggesting additional barriers
income families manage their Supplemental Nutrition faced by these groups.
1
THE SURVEY
FIGURE 2:
Every month, Propel invites users of the Providers MONTHLY HOUSEHOLD EARNINGS
application to take an online survey on a range
of topics related to household financial stability, 100%
12 n $2,000+
including a battery of questions related to the n $1,000–$1,999
80
expanded Child Tax Credit. In this brief, we discuss 24 n $500–$999
results from the survey conducted during the first 60 n <$500
two weeks of November (11/1-11/14). The survey 19 n No Earnings
had over 6,000 respondents, more than half of 40
whom were living with children under 18 (56%). 18 Three percent of
20 respondents opted not to
Respondents living with a child under 18 were disclose their income.
asked a number of questions about the October CTC 23
0
payment as well as questions about the receipt of
prior monthly payments. The analyses here focus
only on those respondents with co-resident children
under 18 (we refer to these respondents as parents HOW MANY LOW-INCOME FAMILIES HAVE
but some may be non-parental primary caregivers). RECEIVED THE CTC?
Families in our survey are economically disadvantaged We asked parents if they received the October payment
relative to the broader population. Figures 1 and 2 of the Child Tax Credit, and if they did not receive it, we
provide data on employment and monthly household asked them why they had not received the payment.
income among respondents with children under age Based on their responses to this second question, we
18.4 As shown in Figure 1, only 42% of respondents categorized non-recipients into three groups to better
are employed, another 29% are unemployed, and 29% understand why families did not receive the October
are out of the labor force. Figure 2 shows that 23% of payment and how we might reach these families.
households with children had no earnings, 18% had
less than $500 in monthly earnings, and another 19% First, we identified parents who did not receive
had $500-$1,000 in monthly earnings. Only about one- the October CTC payment due to “valid” or “legal”
third of families earned at least $1,000 each month reasons. This group includes parents who opted
(36%). Nearly all families in our study (96%) receive to receive the credit as a lump sum, reported that
some form of public assistance. For instance, 86% another relative or parent received the credit, or
receive SNAP, 21% receive supplemental nutrition reported their child was born in 2021 (and therefore
for Women, Infants, and Children (WIC), and 11% was not yet eligible).5 Second, we differentiated
receive Section 8 housing vouchers. Despite high rates parents who said they hadn’t received the credit but
of unemployment, only 1% receive unemployment noted that they applied and were waiting to get it,
insurance. Additional demographic information on our their payment was “pending,” or their taxes were
sample of parents is available in Appendix Table 1. “amended.” This group may have recently filed, be
waiting on the payment, or may have some other
error/issue that is yet to be resolved. The final
category consisted of parents who had not received
their payments but the reason for non-receipt is
FIGURE 1: EMPLOYMENT STATUS unclear (e.g., they said they didn’t know why) or they
100%
reported processing errors (e.g., a bank or address
n Out of labor force
problem). This last category also includes the 2% of
29 n Unemployed
80 parents who reported not having heard of the CTC.
n Employed
60 Sixty-eight percent of parents reported that they
29 received the October CTC payment (see Figure 3).
40
Another 7% reported not getting the credit, but for
20
valid reasons (e.g., another parent got the credit), and
42 4% reported that the credit was pending (meaning
0 they’d filed to receive it). Thus, 21% of parents did not
get the credit for some other reason.
2
FIGURE 3: FIGURE 4: PERCENT WHO RECEIVED THE
OCTOBER CTC PAYMENT RECEIPT CTC BY MONTH
80% 80%
60 60
40 40
68 21 7 4 65 68 69 68
20 20
0 0
Yes No No, No, Jul Aug Sep Oct
valid pending
reasons
earnings to receive the benefit up until the 2021
reform). Thus, we expected to find disparities in
We also asked parents if they had received prior
access to the CTC by employment status, since
monthly CTC payments. Among this population, the
families with little to no annual employment may not
rate of receipt has remained quite steady after a
file taxes regularly.
small increase between July and August (see Figure
4).6 An additional analysis shows that 75% of parents When we examine differences by employment status
received at least one of the four payments: 52% of (Figure 5), we find those who reported being out
parents received all four months of the CTC, 7% of the labor force were nearly twice as likely to not
received three months, 6% received two, and 9% receive the credit for any reason (43%, reflecting the
received one month of the credit. sum of 10% who reported another parent claimed
the credit or that they opted for a lump sum, 3% who
WHICH CHILDREN ARE STILL NOT
reported a pending payment, and 30% who reported
RECEIVING THE MONTHLY BENEFIT?
not receiving the credit for some other reason)
While the majority of families in our survey report compared to those who were employed (24%). The
receiving the CTC benefit in October, our goal is to rate of non-receipt for those who were unemployed
better understand the characteristics of families (i.e., not currently working, but looking for work) fell
who did not get the credit and are thus left out in between, at 35%. Some of this disparity is driven
of this important, monthly benefit. We focus the by differences in the share reporting not receiving
next discussion on those who did not get the CTC, the credit for valid reasons: 10% of those who are
differentiating between families who did not get out of the labor force reported not getting the credit
the credit for valid reasons (such as another parent for valid reasons, compared to 6% of employed
receiving the credit), those who have pending respondents. This pattern might be expected if, for
applications, and those who did not get the credit for example, a non-working parent allowed the other
another reason. The pattern of non-receipt across parent or another working family member to claim
these three categories provides insight into ways we the child on their 2020 tax return in order to receive
can better ensure that all eligible families get the other work-based tax credits such as the Earned
credit. Income Tax Credit. Additionally, since we only have
information on child living arrangements at a single
The 2021 CTC is distributed based on income and point in time, it is also possible that the child was
living arrangements reported on 2020 income tax living with the other parent during the previous
returns. Families with little or no earnings are not calendar year or splits their time across different
required to file taxes, making it potentially more households, creating some confusion over which
challenging for these families to access the CTC.7 parent should receive the monthly CTC benefit.
The 2021 reform to the CTC expanded eligibility to
families with zero earnings; historically, very low- Closely related to employment is household income.
earning families were not eligible for the benefit While we do not have information on annual income
(individuals had to have at least $2,500 of annual from the previous calendar year, respondents report
3
FIGURE 5: CTC RECEIPT BY EMPLOYMENT STATUS
n No n No, valid reasons n No, pending n Yes
Out of labor force 30 10 3 57
Unemployed 23 7 5 65
Employed 14 6 4 77
0 20 40 60 80 100%
Due to rounding, figures may not sum to 100%.
their total household income from earnings in the compared to 13% among households with at least
last month. We group these individuals into several $2,000 of monthly earnings).
categories: those with no earnings from the previous
month, less than $500, $500-$999, $1,000-$1,999, In an earlier brief, we found differences in receipt by
and $2,000 or more in monthly earnings.8 education, survey language (Spanish vs. English), and
by race/ethnicity. In Figure 7, we examine whether
We find a substantial income gradient in CTC receipt those differences remained two months later. In
(see Figure 6): 45% of individuals who report having July and August, we found those without high school
no household earnings in the previous month did degrees were 8-13 percentage points less likely to
not receive the CTC in October — either due to valid have received CTC payments. We continue to see
reasons, a pending payment, or some other reason — a similar gradient in October. Those with at least
compared to only 22%-24% of individuals with $1,000 some college and those who completed an associate
or more in monthly household earnings. Individuals degree or more have similar rates of non-receipt
with $1-$500 in monthly household income have (29% did not get the credit). The rate of non-receipt
similarly low rates of CTC receipt, with 43% not increases slightly for those with only a high school
receiving the October payment. Again, some of these degree (33%), though this increase is largely driven
disparities are driven by differences in the share by a higher share of respondents who did not receive
reporting not receiving the benefit for valid reasons, the payments for valid reasons. As we found in earlier
but income gaps remain large even if we compare surveys, we continue to find that those without high
those who did not receive the benefit due to some school degrees were much less likely to receive the
other reason (30% among non-earning households October CTC payment (41% report not receiving the
benefit for any reason).
FIGURE 6: CTC RECEIPT BY HOUSEHOLD MONTHLY INCOME
n No n No, valid reasons n No, pending n Yes
$2,000+ 13 5 4 79
$1,000–$1,999 13 7 4 76
$500–$999 17 6 4 73
$1–$500 27 11 5 57
No earnings 30 10 5 55
0 20 40 60 80 100%
Due to rounding, figures may not sum to 100%.
4
FIGURE 7: CTC RECEIPT BY EDUCATION, RACE/ETHNICITY, AND SURVEY LANGUAGE
n No n No, valid reasons n No, pending n Yes
Associate degree
or more 17 6 6 72
18 7 4 71
Some college
19 10 4 68
High school
27 9 5 59
<High school
Other 20 10 5 66
Hispanic 27 5 4 64
White 20 8 4 68
Black
19 9 4 67
English 19 8 4 69
Spanish 39 3 4 54
0 20 40 60 80 100%
Due to rounding, figures may not sum to 100%.
Our earlier brief also noted that those who took parents are less likely to report they didn’t get
the survey in Spanish were 15 percentage points the credit for valid reasons (e.g., another parent
less likely to have gotten the August CTC payment claimed the child) than all other racial/ethnic
compared to those who took the survey in English. groups.
In October, we continue to find a 15 percentage
point gap. Approximately one-third (31%) of ARE THESE DIFFERENCES ALL DRIVEN
parents who took the survey in English reported BY DIFFERENCES IN TAX FILING?
not receiving the credit for any reason, compared
In Table 1, we examine differences in tax filing
to nearly half of those who took the survey in
among the groups examined in this brief to consider
Spanish (46%). This discrepancy is especially
whether this might explain some of the observed
troubling as 39% of the Spanish language parents
discrepancies in receipt. Note, we only asked
did not receive the credit for some other reason.9
respondents about their 2020 tax filing, but the IRS
When we look at differences by race/ethnicity, uses the 2019 tax filing status if 2020 is not available.
we find Hispanic respondents were more likely to
Although we do not have data on 2019 tax filing,
report not getting the October CTC payment for
because the CTC is administered through the
any reason (36%) compared to parents of other
tax system, we examined whether there were
races/ethnicities (roughly 32%) and much more
differences in receipt by 2020 tax filing status.
likely to report not receiving the credit due to some
A few key findings stand out. Consistent with
reason besides another parent claiming the credit,
our findings on receipt, those who are out of the
opting for a lump sum, or a pending payment
labor force (55%), those with no (55%) or very low
(27% compared to roughly 20% among other
earnings (67%), and those without high school
race/ethnicities).10 It is also notable that Hispanic
degrees (64%) are far less likely to report that
5
HOW DID FAMILIES WHO GOT THE
TABLE 1: 2020 TAX FILING OCTOBER CTC USE THE PAYMENT?
BY DEMOGRAPHIC GROUP
% who filed taxes These economic and racial disparities in monthly CTC
benefit receipt are concerning for several reasons.
Employment Status Recent evidence suggests the monthly benefits are
Employed 78 already reducing child poverty substantially and
Unemployed 69
Out of labor force 55 reducing the incidence of material hardships such as
food insecurity.11 Thus, eligible families that are not
Household monthly earnings receiving these monthly benefits are missing out on
No earnings 55
$1-$500 67 a potentially vital source of income. To provide more
$500-$999 72 insight on what these families might be missing,
$1,000-$1,999 77 we now examine how families receiving the CTC are
$2,000+ 79
spending their monthly payments.
Education
<High school 64 As reported in an earlier brief, parents continue to
High school 70 report using their CTC payments to pay for basic needs
Some college 71
Associate degree or more 75 and child-related expenses (consistent with other
surveys).12 As shown in Table 2, 75% reported using the
Language money to pay bills. The share of parents who said they
Spanish 71
used the money on rent or mortgage increased slightly
English 69
from 9% in September to 12% in October. Although
Race/Ethnicity 4% of parents reported using the October money for
Black 68 school supplies and clothes, this was a decline from
White 70
Hispanic 73 the September survey, where 11% reported spending
Other 63 money on school-related expenses. Open-ended
responses also showed parents reporting a shift in
Sample is restricted to parents with children under
the age of 18 who responded to questions about the
the type of clothing they were buying kids, away from
Child Tax Credit. school clothes and toward buying children winter
clothes, boots, and coats.
CONCLUSION
they filed taxes in 2020 compared to those who are
employed (78%), have higher earnings (79% among Our findings suggest the CTC is reaching the majority
those with at least $2,000 of monthly earnings), or of families with low incomes. Each month, about two-
more education (75% among those with associate thirds of respondents report receiving a CTC payment,
degrees). and as of November, approximately three-quarters
of respondents reported receiving a payment in at
However, the differences in receipt that we observe least one month between July and October. While
by survey language and for Hispanic respondents these rates are somewhat lower than those reported
do not appear to be driven by tax filing. In fact, both elsewhere13, the respondents in our survey are much
Spanish language survey respondents and Hispanic more economically disadvantaged than the population
respondents are somewhat more likely to have filed overall. Additionally, many of those who report
their 2020 taxes, despite lower overall receipt of the not receiving the CTC in October state they did not
tax credit. This finding is perplexing and suggests receive the credit for some other valid reason, such
tax filing does not explain the differential we observe as another parent claiming the child or opting for a
among these populations. lump sum payment (7%), and another 4% report their
credit is pending, which may represent a payment
This finding is also consistent with new research by
in progress or another potential issue we cannot
Propel, which suggests that the majority of families
observe. Together, this suggests that about 75%-80%
with low incomes who have not received a monthly
of families either received the benefit in October, are
CTC payment filed taxes (in 2020 or 2019), but
waiting to receive it, or did not receive the credit for
are still facing challenges receiving their CTC for
valid reasons.
unknown reasons.
6
ABOUT THE AUTHORS
TABLE 2: HOW DID YOU USE THE CTC?
% Natasha Pilkauskas and Katherine Michelmore are
associate professors of public policy at the Gerald R.
Bills and living expenses Ford School of Public Policy at the University of
Paid bills 75 Michigan.
Paid rent/mortgage/for housing 12
Bought food 8
Bought household necessities (e.g., toiletries, The authors would like to acknowledge Propel for its
cleaning supplies) 6 partnership in fielding the survey and sharing results
Paid for gas or car expenses 5
Paid loans/debts 4 for analysis. We would also like to thank U-M Poverty
Solutions associates Samiul Jubaed for his
Child related expenses assistance with the data cleaning and Patrick Cooney
Bought child necessities (diapers, wipes, other) 9
and Luke Shaefer for their input.
Bought child clothes 9
Paid for child care 5
Bought school supplies 2
Bought school clothes/uniforms 2
Other
Put money in savings 1
Clothes (not specified kid/adult) 2
Holiday/birthday gifts 1
Other 2
N 1,982
Note: Categories are not mutually exclusive (people
could select multiple responses). Sample is
restricted to parents who received the CTC and who
provided a response. Percents may sum to more than
100%.
Nonetheless, this high overall rate of receipt masks
significant economic disparities in who receives the
benefit within this low-income sample. Although we
cannot determine why families are not yet receiving
the credit, it is clear that employed individuals and
those with higher family income were substantially
more likely to report receiving the CTC in October,
suggesting the monthly credits are still not reaching
the most vulnerable families.
As Congress debates a potential extension of the
expanded CTC, it is essential we continue to search for
ways to reach families who have not yet gotten the CTC
to reduce the disparities we discuss here. Additionally,
we continue to find relatively low rates of CTC receipt
among Hispanic parents and households that took
the survey in Spanish, despite similar rates of tax
filing between these groups and other respondents.
This finding suggests Hispanic and Spanish language
parents face additional barriers in receiving their
monthly CTC benefits, an area that requires further
research to understand why this differential might
occur.
7
APPENDIX TABLE 1:
CHARACTERISTICS OF FAMILIES WITH CHILDREN IN THE STUDY SAMPLE
%
Employment Status
Employed 42
Unemployed 29
Out of labor force 29
Filed taxes 69
Age
18-24 8
25-34 42
35-44 37
45-54 10
55+ 3
Household Structure
Partner/spouse 28
Extended family (parents, siblings, aunts/uncles) 11
Other (friends, roommates) 4
Gender
Woman 95
Geography
Rural 33
Urban 47
Suburban 20
Race/Ethnicity
Black 36
White 32
Hispanic 23
Other 8
Education
<High school 25
High school 41
Some college 25
Associate degree or higher 9
Household monthly earnings
No earnings 23
$1-$500 18
$500-$999 19
$1,000-$1,999 24
$2,000+ 12
Prefer not to say 3
Survey Language
Spanish 10
English 90
Public Assistance
SNAP 86
SSI 15
WIC 21
TANF 9
UI 1
Section 8 housing 11
Note: Sample is restricted to households with children under the age of 18.
8
ENDNOTES
1
About 90% of families are eligible for the larger credit, as the larger CTC benefit phases out for single filers with income
above $112,500 and married filers with income above $150,000. Additionally, only children with valid Social Security Num-
bers and who live with at least one qualifying relative can receive the benefit.
2
Sophie Collyer, Christopher Wimer, and David Harris, “Earnings Requirements, Benefit Values, and Child Poverty under
the Child Tax Credit,” Columbia University Center on Poverty and Social Policy 3, No. 3 (March 2019).
3
Zachary Parolin, Elizabeth Ananat, Sophie Collyer, Megan Curran, and Christopher Wimer, “The Initial Effects of the
Expanded Child Tax Credit on Material Hardship,” Columbia University Center on Poverty and Social Policy, Poverty and
Social Policy Working Paper, August 30, 2021.
4
Respondents are asked to report their current employment status, including whether they work full or part-time, whether
they are not working but looking for work, not able to work, or are retired. For simplicity, we group individuals into one of
three categories: employed (full and part-time), unemployed (not working but looking for work), or out of the labor force
(not working and not looking, not able to work, or retired).
5
Though initially the IRS said parents who had a child in 2021 would be able to report that new dependent through an IRS
update portal, it is not clear that this functionality was ever added to the website.
6
Respondents who had not heard of the CTC were not asked this question. These estimates mirror almost exactly the share
of parents who reported receiving the CTC in the surveys we ran in previous months. The estimates are slightly lower than
those obtained by Propel through an in-app pop-up survey. The brief nature of the pop-up survey means we cannot assess
if differences are driven by sample characteristics, the timing of the surveys, or the methods of distribution.
7
Single filers with income below $12,400 are not required to file taxes, unmarried filers with children are not required to
file taxes if their income is below $18,650, and married filers are not required to file taxes if their income is below $24,800
in 2020. The IRS designed an online portal for families who did not file taxes in 2020 to input their information, but just
25% of parents in our survey report having used the portal. If 2020 filing information is not available, the IRS uses tax infor-
mation from 2019.
8
Respondents may also opt not to disclose their income; only 3% did so.
9
An additional analysis examining the number of months of receipt (range 0-4) shows similar discrepancies. Only 32% of
Spanish language survey respondents received all four CTC payments compared with 55% of English language parents.
10
Note, 36% of Hispanic respondents took the survey in Spanish.
11
Zachary Parolin, Elizabeth Ananat, Sophie Collyer, Megan Curran, and Christopher Wimer, “The Initial Effects of the
Expanded Child Tax Credit on Material Hardship,” Columbia University Center on Poverty and Social Policy, Poverty and
Social Policy Working Paper, August 30, 2021.
12
https://www.cbpp.org/blog/9-in-10-families-with-low-incomes-are-using-child-tax-credits-to-pay-for-necessities-ed-
ucation
13
In July of 2021, the IRS reported that nearly 60 million children received the CTC payment in July, which corresponds to
roughly 80% of all children under the age of 18. https://home.treasury.gov/news/press-releases/Treasury-and-IRS-An-
nounce-Families-of-Nearly-60-Million-Children-Receive-%2415-Billion-Dollars-in-First-Payments-of-Expanded-and-
Newly-Advanceable-Child-Tax-Credit
9
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