Q: Why did so many families fail to take advantage of the newly expanded federal child tax credit that was part of President Bush’s historic tax cut enacted last year?
A: The problem is lack of awareness. And sadly, the Internal Revenue Service has failed to ensure eligible taxpayers claim the new tax breaks according to an internal Treasury report. As chairman of the tax-writing Senate Finance Committee in the spring of 2001, I shepherded through Congress the president’s $1.35 trillion tax relief package that included $172 billion over 10 years to expand and improve the child tax credit. The Senate put a premium on making the tax credit meaningful for low-income families. And so we made the $1,000 per child tax credit, fully phased in over the next decade, refundable to allow taxpayers without any federal tax liability to benefit. In the first year, 1.6 million families claimed the newly refundable tax credit. However, more than 600,000 families who may have been eligible to claim the valuable credit did not do so in 2001. That’s a shame. To these hard-working families, hundreds of dollars returned from Uncle Sam would make a big difference to meet the demands of busy households struggling to make ends meet. The refundable tax credit is available to working parents who make over $10,000 per year, phasing in at 10 percent of earnings above $10,000. So under the new law, a single mother of one who makes $13,000 is eligible for a $300 refundable tax credit. A parent who earned $16,000 last year would have been eligible for the full credit of $600 per child.
Q: Can these families recoup the benefits of the expanded child tax credit if they did not make a claim on their 2001 tax returns?
A: Yes, by a filing an amended tax return. However, I’m disappointed the Internal Revenue Service failed these vulnerable families in the first place. According to government figures, more than half of those who did not take advantage of the new federal child tax credit earned between $10,000 and $20,000 a year. Plus, nearly 60 percent of this group are single moms and dads. Regrettably, the IRS abandoned an outreach program intended to identify those folks who should have claimed the credit but did not. As one of the leading lawmakers in Washington who leans on the IRS to improve its customer focus, I’m extremely disappointed the agency abdicated its responsibility to serve the taxpaying public on this issue. Instead of lightening the load on taxpayers, the IRS has created a new layer of burden for those who missed out on the new credit. Now, these taxpayers must file an amended return which in turn forces the IRS to spend resources on processing the 2001 tax information more than once. This situation should not recur during the next tax cycle. That’s why I have urged the IRS to deploy outreach efforts that will ensure low-income families who are eligible for this expanded tax benefit take advantage of it the first time around on their 2002 tax statements.