The Internal Revenue Service had to work quickly last year to set up an online portal for the expanded Child Tax Credit to allow parents to claim or reject advance payments, but the rollout had some hiccups and over 1,300 taxpayers suffered identity theft, according to a new report.
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The IRS had to set up the portal quickly as well as start sending out the advance monthly payments. On July 15, 2021, the service issued the first of six advance Child Tax Credit payments, and as of December 2021, the IRS issued approximately 216.9 million advance payments totaling $93.5 billion. However, not all capabilities were made available to taxpayers in 2021, the report noted.
“The IRS did not deploy the capabilities for taxpayers to update the number of qualifying children and to update their filing status,” said the report.
The IRS also had to do outreach to taxpayers and tax preparers to tell them more about the expanded tax credit. Ahead of time, the agency launched a series of comprehensive and far-reaching education and awareness campaigns. It also coordinated with internal and outside stakeholders to identify the taxpayers who would be most affected from these changes to focus outreach efforts.
“The IRS’s collective outreach efforts included providing information on www.IRS.gov; updating tax publications; developing and distributing marketing materials; using traditional and social media, including YouTube videos; and conducting in-person outreach events,” said the report.
In January of this year, the Treasury Department and the White House announced the relaunch of a revamped website,
The IRS also had to set up controls to keep track of the advance Child Tax Credit updates and detect potentially fraudulent tax returns filed through the Child Tax Credit Non-filer Sign-up Tool. As of Dec. 28, 2021, the service selected 133,057 nonfiler tax returns for potential identity theft, of which 1,349 tax returns were confirmed for identity theft.
The American Rescue Plan Act required taxpayers to reduce their Child Tax Credit by the amount of the advance payments received when filing their tax year 2021 returns, but that too presented some problems. “Although the IRS has developed a process to identify discrepancies between the advance payments reported on the tax return and advance payments recorded on the taxpayer’s account, the process did not account for undelivered checks,” said the report.
TIGTA made two recommendations, including that the IRS notify the Treasury Department about concerns with the accuracy of the information on the www.ChildTaxCredit.gov web page and develop programming that will account for undelivered checks during the reconciliation process. IRS officials agreed with both recommendations and implemented them.
The work came during a very busy filing season last year.
“These achievements were accomplished while the IRS was distributing a third round of Economic Impact Payments, also authorized by the ARPA, addressing digitalization efforts to mitigate the impact of COVID on in-person processes, and implementing retroactive legislation that affected tax year 2020 returns after the filing season was underway,” wrote Kenneth Corbin, commissioner of the IRS’s Wage and Investment Division, in response to the report. “The legislative changes affected tax return processing systems, and required updates to forms, publications, letters and notices.”
Nevertheless, within nine months, the IRS issued more than 200 million advance CTC payments totaling over $93 billion, impacting nearly 61 million children.
