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1 1 (March 12, 2021)

handle is hein.crs/govecps0001 and id is 1 raw text is: Congressional * Research Service Child Tax Benefits and Children with Complex or Dynamic Living Arrangements March 12, 2021 The federal income tax system provides substantial amounts of cash assistance for many families with children, often in the form of refundable tax credits. The two largest benefits for families with children (and workers) are the earned income tax credit (EITC) and the child tax credit. To claim these benefits, tax filers and children have to meet numerous requirements. Policymakers have recently expressed interest in providing additional cash assistance to families with children, often in the form of tax benefits. In the 117th Congress, Congress passed the American Rescue Plan Act of 2021 (P.L. 117-2), providing a larger child tax credit that is issued on a periodic basis throughout the year (i.e., advanced) instead of as a lump sum when income tax returns are filed. Tax rules for claiming children for benefits do not align with the lived experience of some families in the United States, which may lead to confusion for these families and administrative issues for the Internal Revenue Service (IRS). Family living, caregiving, and financial arrangements can be intricate; a family's understanding of shared childrearing (and therefore what they may perceive as reasonable when claiming children for tax purposes) may not match the tax code's extensive set of rules for qualifying children (link requires paid subscription). Some children have more than one individual who is eligible to claim them; others may have no one. Many children move between different living arrangements in often unforeseen ways from year to year or on a more frequent basis. Children who experience these forms of family arrangements are also disproportionately likely to be from economically vulnerable backgrounds. As a result of the incongruity between children's living arrangements and current tax rules, certain policy aims for the tax system such as limiting burdens on tax filers, encouraging tax compliance, and reducing child poverty may be hampered in practice. Various policy design and implementation choices can affect the extent to which tax benefits readily aid children. This Insight provides an overview of the living arrangements of children as they relate to key tax provisions. Complex Family Arrangements Many children receive significant financial, caregiving, and other forms of support from parents, extended family, or nonrelative kin who may or may not share a residence with them. The tax code, on the other hand, generally allows only one adult or married couple to claim tax benefits for children that are related Congressional Research Service https://crsreports.congress.gov IN11634 CRS INSIGHT Prepared for Membersand Committeesof Congress

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