Bill Overview
Title: To amend the Internal Revenue Code of 1986 to modify the mandatory delay in making certain refunds.
Description: This bill modifies provisions specifying the date for making refunds of the refundable portion of the child tax credit and the earned income tax credit to provide that no credit or refund of an overpayment resulting from such credits shall be made to a taxpayer before the earlier of the date on which the Internal Revenue Service completes a matching of information relevant to such credits and other wage information, or the 15th day of the second month after the close of the taxable year (i.e., February, for taxable years that are calendar years).
Sponsors: Rep. Pascrell, Bill, Jr. [D-NJ-9]
Target Audience
Population: People claiming child tax credit or earned income tax credit
Estimated Size: 30000000
- The Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) are primarily claimed by lower-income and middle-class families, often providing substantial financial assistance.
- The delay in tax refunds can impact anyone who claims these credits, leading to potential cash flow issues for families who rely on early refunds for immediate financial needs post the holiday season.
- In the US, hundreds of millions of tax returns are processed each year with a significant number involving claims for CTC and EITC.
- In 2020, around 26 million Americans received the Earned Income Tax Credit (EITC) alone.
Reasoning
- The Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) are primarily targeted at low to middle-income families.
- These families often rely on early refunds to help meet immediate financial needs at the start of the year.
- Any policy that delays their refund could cause short-term cash flow issues, potentially resulting in additional stress or financial strain.
- The policy may help reduce fraud or errors in tax returns, potentially increasing long-term tax system efficiency, but the immediate impact is likely to be mixed.
Simulated Interviews
Retail Worker (Cincinnati, OH)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 15/20
Statement of Opinion:
- I rely heavily on my tax refund to catch up on bills after the holidays.
- A delay in receiving these funds would make it difficult for me to pay for my car insurance and daycare expenses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Construction Worker (Phoenix, AZ)
Age: 44 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 12/20
Statement of Opinion:
- I budget my refund into paying for necessary home repairs.
- A delay means I might have to take a loan to cover these costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Registered Nurse (Des Moines, IA)
Age: 33 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 1.5 years
Commonness: 7/20
Statement of Opinion:
- The delay would slightly impact us as I typically use the refund for savings and family outings.
- It's not critical, but it's inconvenient.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Self-employed Graphic Designer (Boston, MA)
Age: 48 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 10/20
Statement of Opinion:
- The policy would affect us due to business expenses accounted for by our tax returns.
- Any delay in receiving funds would impact cash flow for my freelance work.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 7 |
| Year 20 | 6 | 7 |
Part-time Student (Jacksonville, FL)
Age: 25 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- I am not directly affected by the policy as I do not claim these credits.
- This doesn't change my financial situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 7 |
School Teacher (Houston, TX)
Age: 39 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 1.0 years
Commonness: 10/20
Statement of Opinion:
- I use my refund for minor home improvements and class supplies.
- A delay would cause mild inconvenience but not significant financial stress.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 9 |
| Year 20 | 9 | 9 |
Waiter (New York, NY)
Age: 30 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- I don't engage with these credits, so the policy doesn't affect me.
- I focus on immediate daily expenses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 7 |
Nonprofit Administrator (Chicago, IL)
Age: 52 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 1.0 years
Commonness: 10/20
Statement of Opinion:
- We rely on refunds to assist with semester fees.
- The delay could be stressful depending on our cash flow at the time.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 8 |
| Year 5 | 7 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Retired (Birmingham, AL)
Age: 62 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 5/20
Statement of Opinion:
- My own finances are unaffected, but I might need to support my children longer if their refunds are delayed.
- Family dynamics could be strained if they're financially pressured.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 7 |
| Year 5 | 6 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 8 |
IT Specialist (San Francisco, CA)
Age: 28 | Gender: other
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 9/20
Statement of Opinion:
- This policy does not affect my financial situation at all.
- I'm more concerned with issues like housing costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $10000000)
Year 2: $2000000 (Low: $1000000, High: $5000000)
Year 3: $1000000 (Low: $500000, High: $3000000)
Year 5: $1000000 (Low: $500000, High: $3000000)
Year 10: $1000000 (Low: $500000, High: $3000000)
Year 100: $1000000 (Low: $500000, High: $3000000)
Key Considerations
- The policy modifies refund timing rather than refund amounts.
- Cash flow challenges may occur for the affected taxpayers due to delayed refunds.
- IRS must ensure robust information matching to prevent potential taxpayer grievances.
- Potential administrative cost savings through reduced error rates and fraud prevention must be monitored.
- Impacts need monitoring over time to capture any unanticipated changes in taxpayer behavior.