A divided government will likely impede tax policy in 2023 as a GOP House that wants to go after the IRS faces a Democratic administration and Senate with differing tax plans, including an extended Child Tax Credit.
In the following year, the spotlight may turn to how the IRS uses $80 billion in extra funding from the Inflation Reduction Act.
Unprocessed Tax Returns
We’ll see immediate results of the funding in answering the phone and clearing the backlog of tax returns, giving individuals their refunds. Particularly, people should start seeing these gains in February 2019, says Urban-Brookings Tax Policy Center expert Howard Gleckman.
Meanwhile, unprocessed tax returns have been a concern since the IRS had to scale back operations in 2020 owing to the coronavirus outbreak.
Over the past two years, the backlog has numbered in the tens of millions of returns and still stands at over 6 million, according to the IRS’s National Taxpayer Advocate (NTA).
Read more: Remaining Child Tax Credit still unclaimed? Here’s what you need to do!
Biden May Revive Child Tax Credit
Moreover, the expanded Child Tax Credit that helped lift millions of children out of poverty could return permanently if President Biden can convince enough Democrats to include a job condition.
The Biden administration’s 2021 American Rescue Plan increased the CTC from $2,000 to $3,000 for children over 6 and from $2,000 to $3,600 for children under 6. Also, Republicans and several Democrats opposed extending the credit last year.
Many Democrats, including Biden, oppose employment requirements. This might change if Congress passes an increased CTC before Republicans take control of the House in 2023.
Meanwhile, if it means passing legislation this session, more Democrats may favor a work requirement. However, this will need political compromises on both sides, such as restoring expiring company tax incentives in exchange for a more generous Child Tax Credit.
