Anti-poverty advocates urge federal government to protect Child Tax Credit and Earned Income Tax Credit from seizure for overdue debts

More than 100 consumer groups, legal centers and anti-poverty advocates are urging lawmakers and the Biden administration to protect tax credits they believe are essential for low-income parents and Americans, who could make face a smaller refund this year if they owe the federal government any money.

The Internal Revenue Service can draw tax refunds to cover taxpayers’ unpaid federal debts. The first half of the expanded child tax credit – distributed in six monthly installments to millions of parents starting last summer – could not be seized, but the second half of the credit and the tax credit earned income, which benefits low-income families, can be shaved or bypassed entirely from tax refunds to offset federal debts.

“About half of borrowers who default have dependent children, suggesting that millions of families could lose these anti-poverty payments due to Treasury compensation,” more than 100 groups, including the Massachusetts Law Reform Institute , the Greater Boston Legal Services and the National Consumer Law Center wrote to Treasury Secretary Janet Yellen on Thursday.

Last week, the US Department of Education announced that it would suspend until November 1 the garnishment of tax refunds and Social Security payments to make up for delinquent student loans. Education Secretary Miguel Cardona said earlier this month that the Child Tax Credit should not be garnished to cover the federal debt.

But making the child tax credit and the earned income tax credit exempt from seizure this year would require legislative protection by Congress. Legal, consumer and poverty groups have urged Yellen to include “recommendations for additional protections” in the Biden administration’s fiscal year 2023 budget.

The groups also noted that despite the power to circumvent offset requirements when they create economic hardship for taxpayers, only 511 people received offset bypass refunds last year, according to the National Taxpayer Advocate.

Poverty experts say the expanded Child Tax Credit – which eliminated minimum income requirements and increased from $2,000 to $3,000 for children aged 6 to 17 or $3,600 for children under 6 – almost halved child poverty last year.

The payments have helped lift tens of thousands of Massachusetts children out of poverty.

First approved as part of COVID-19 relief in the $1.9 trillion U.S. bailout package signed by President Joe Biden in March, the provision allowed taxpayers to receive monthly payments of $250 $300 in advance – lifting at least 3 million children out of poverty soon after checks start hitting bank accounts in July, according to a study by the University’s Center on Poverty and Social Policy of Columbia.

Advocates said around 27 million children “including half of black, Latino and rural children”, who would not have qualified in previous years because their parents’ income was too low, have benefited in 2021.

“But because of the Treasury’s practice of offsetting tax refunds to collect public debt, millions of low-income families risk missing out on these essential lifelines,” the groups wrote.

Biden and congressional Democrats, including members of the Massachusetts delegation, called for a permanent expansion of the child tax credit.

Among many investments in social programs and families, credit has become a sticking point in Biden’s $1.7 trillion Build Back Better Act, which passed the House of Representatives but failed. failed to reach Biden’s office last year. The Democrats could not win the support of any Sens Republicans or Democrats. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona.

In November, Senator Ed Markey and medical professionals at Boston Medical Center urged the US Senate to quickly pass the law, which included a one-year extension of the expanded child tax credit.

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  • ‘We don’t want a delay’ in child tax credit over $3,000, says Rep. Jim McGovern; payments could lift 55,000 Massachusetts children out of poverty