Some parents say they were shortchanged by the IRS in a closed-door session on the 2019 tax filing season, and they’re vowing to make it right.
Trump’s tax overhaul redirected $1.5 billion in child tax credit money, among other changes, to individual states, where they can spend it on their own priorities. But the Trump administration could decide later this month whether to release the new tax credits.
The Child Tax Credit was increased in the Senate tax bill. Some states worried that state leaders would spend the money on things other than tax cuts for low-income families.
In Delaware, Republican Gov. John Carney said this would put children “on the backs of taxpayers” and called for Maryland’s multistate legislature to pass a law prohibiting the use of any of the money on anything other than tax cuts.
“Is it possible for Maryland to fight an effort from a state to prevent it from using its share of the money to help middle-class families?” Carney asked.
“It’s hard for me to imagine that a state can say no to the Trump administration, but it’s certainly something that we’re going to investigate.”
Democratic Gov. Larry Hogan vowed to urge lawmakers to pass a law that disallows money from the credit being spent on tax cuts.
In Maryland, parents say they were scheduled to file their income tax returns Friday, but got a last-minute notification from the IRS indicating that was incorrect, saying the refund was ready.
The state Department of Revenue Services helped about 1,000 parents get refunds. There were about 1,500 participants Friday, said Rick Araujo, a spokesman for the state DRS.
One group of parents who called in complaints to the DRS estimated they were shorted more than $1,500 because of the tax credit shift. The parents agreed to speak only on the condition of anonymity because they were worried about IRS retaliation.
“I’m frustrated, and it makes no sense why we would be penalized,” said Krista Sawyer, a four-time CTC filer and teacher at a public school in Montgomery County, Maryland.
An IRS spokesman said the refund is “entirely federal money. It’s not a Maryland state asset,” and parents can call the DRS directly to resolve their claims.
Some who received refunds had problems activating them. Some said they hadn’t been told of the delay in payments, and had to fill out IRS forms to activate their refund. Others said the IRS insisted on pulling copies of their W-2s from employers so they could verify the information with the state.
Taxpayers in Delaware were asked by their DRS and state tax credit coordinator to show employers additional documents before the refund was activated, according to a DRS spokeswoman.
Maryland isn’t alone in questioning the new federal policy. Democratic U.S. Sen. Maggie Hassan of New Hampshire said it creates “unnecessary confusion.”
“Given the harm to taxpayers as a result of the IRS ‘fix’ to the child tax credit, we cannot in good conscience release any of the cash owed to taxpayers,” she said.
Barbara van Schewick, a professor at Stanford Law School, said she can’t recall a policy like this in 50 years. The last time the IRS gave states more funding than the federal government, in the 1980s, a senator from Ohio wrote then-Secretary of Treasury James A. Baker a letter complaining, arguing that state lawmakers should be accountable to taxpayers.
The first-term senator, Richard C. Shelby, suggested that Congress could give the states total control of all federal funding and “you would never need to worry about their priorities.”
Shelby later became treasury secretary.
Voters in 10 states approved ballot measures this year increasing the state’s share of the federal credit, according to the National Conference of State Legislatures.
Of the remaining 37 states that did not enact new programs, Wisconsin’s DRS last month issued a memo to its offices for parents with Medicaid applications because state legislation that would have authorized that tax credit “has not yet been signed into law.”
In Idaho, a spokesman for the DRS said that only about 15 of the roughly 1,500 adults who had received refunds had applied to obtain another one by the end of the week.