Correcting the Record on Child Tax Credit Compliance Concerns

This is first analysis in a series on policies for low-income children and the reconciliation debates currently taking place in Congress, by Jack Landry, lead researcher on Guaranteed Income. This paper analyzes the debates around the child tax credit and improper payments.

Summary:

• IRS data show that incorrect refundable child tax credit (CTC) claims make up less than one percent of total tax noncompliance. 
• The nonrefundable part of the CTC claimed by middle- and high-income families has a higher improper payment rate than the low-income, refundable portion. 
• There is strong evidence that most incorrect CTC payments are benign errors—the bulk of incorrect claims come from close family members or others living with the child, not malicious scammers. 
• Many proposed solutions to reform the integrity of the CTC would limit access to the credit. For instance, requiring non-parents to prove they have formal custody of the child they claim would effectively exclude over thirty percent of children not being raised by their parents who do not have formal custody arrangements.