IRS Could Seize The Expanded Child Tax Credit For Past Debts

Any American citizen who received monthly payments under the expanded child tax credit could be in for a nasty surprise with his tax refund if he owes a debt to the Federal Government reports the

U.S. parents received 50% of the 2021 child tax credit in monthly installments from July to December 2021. The remaining 50% can be claimed by parents when they file their 2021 tax returns leading many to get a refund.


The Feds could seize a tax refund.

The U.S. Government cannot seize the monthly payments for citizens’ federal debts. However, the second half of the credit, which comes in a tax refund, could be seized by the Feds. A similar situation can happen to families who receive Earned Income Tax Credit (EITC), a tax break for low-income families.

Abby Shafroth, staff attorney at the National Consumer Law Center, said, “The (child tax credit) and the EITC are rightly celebrated for lifting millions of children out of poverty, and the CTC expansion this year has significantly reduced food insufficiency among families. But the Treasury Department’sDepartment’s practice of seizing tax refunds to collect government debt puts millions of low-income families at risk of losing these critical lifelines.”

Many organizations deplore seizures for old debts.

The move has been deplored severely by many organizations. The National Consumer Law Center (NCLC), the Center for Law and Social Policy (CLASP), and the Institute for College Access & Success (TICAS) have dashed off letters to the U.S. Treasury Secretary Janet Yellen and the Treasury Department urging them to shield the fund from seizures for old debts also known as ” offsets.”

Maryann Broxton of the Center for Law and Social Policy (CLASP) said that refunds are vital for people to cater to their day-to-day needs, and it is very cruel to snatch them for their offsets. Broxton urged the Department of the Treasury to exclude CTC and EITC refunds from being offset.

Earlier on Tuesday, the Education Department declared that it is suspending the seizure of tax refunds for past-due student loans through Nov. 1, 2022. Education Secretary Miguel Cardona said that tax credit should not be garnished. However, there is no clear-cut policy not to garnish refunds for federal debts.