Tens of millions of Americans and more than a million North Carolinians risk losing out on the stimulus payments provided through the recent CARES Act. These payments of $1,200 to individuals and $2,400 to married couples are a crucial lifeline during the economic and health crisis of the COVID-19 pandemic.
Under the current structure of the CARES Act payments, about 370,000 North Carolinians miss out on these dollars because they are older than 17 and claimed as a dependent on their parents’ taxes. An additional 300,000 North Carolinians are ineligible because they, or someone in their household, files taxes using an ITIN (Individual Tax Identification Number).
About 12 million Americans — including 469,560 North Carolinians — risk missing out on the stimulus payments if they do not file a form to receive it, according to a new report from the Center on Budget and Policy Priorities (CBPP).
The CARES Act payments are a key tool to help families cope with the loss of jobs and income in the pandemic and stimulate the economy. Aggressive outreach can help reach the 469,560 North Carolinians who risk missing out on the CARES Act stimulus payments because they did not file a tax return, many of whom are very low-income families with children, people who have been disconnected from work opportunities for a long period, and low-income adults not raising children in their home.
The payments are important for providing stabilizing cash income to households. Cash income has been found to provide near-term benefits in balancing the costs of basic or emergency needs, as well as long-term benefits to educational attainment, economic mobility, and better health outcomes. The IRS, working with the Social Security Administration and the Department of Veterans Affairs, has been automatically delivering these payments to tens of millions of people who regularly file federal income taxes or receive certain federally administered benefits. But the automatic payment method misses about 12 million people nationally — including people of color, children whose parents are paid low wages, people without secure housing, and others — because they aren’t required to file federal income tax returns due to their low incomes and do not participate in one of those specified, federally administered programs.
According to the report:
“This group of non-filers eligible for payments are disproportionately people of color because they are likelier to have lower incomes due to historical racism and ongoing bias and discrimination. Ensuring that low-income people of color receive the payments for which they qualify is especially important given emerging evidence that they are being hit hardest by both the economic and health effects of the pandemic.”
The outstanding payments to non-filers amount to roughly $536 million for North Carolinians, which — if delivered and spent — would help people who are struggling to make ends meet and give state and local economies a much-needed boost.
Governors and other state leaders can play a central role in reaching these individuals, roughly three out of four of whom participate in SNAP (formerly Food Stamps) or Medicaid, which states and counties administer. States and localities will also need to reach out to people eligible for payments who may be outside the reach of SNAP and Medicaid. This can include people who are experiencing job or earnings loss, housing insecurity, or homelessness.
State officials are already in touch with most of these people through existing programs like SNAP and Medicaid. North Carolina needs to continue with an aggressive outreach already underway and receive the resources necessary to inform all eligible individuals and help them complete the required steps. This will benefit families in need and our community as a whole. Payments to very low-income people are among the most effective ways to stimulate the economy during a recession.
Maximizing the reach of existing policies and addressing the gaps that they present are key efforts that policymakers and administrators should be pursuing.
State outreach now to connect eligible low-income individuals with the tax system will pay dividends if federal policymakers issue additional stimulus payments to boost consumer demand and reduce hardship.
Click here to read the Center on Budget and Policy Priorities report.
Heba Atwa is a Policy Advocate with the Budget & Tax Center, a project of the North Carolina Justice Center.