The number of American kids in poverty went up by 3.7 million last month, partly due to the expiration of monthly child tax credit payments. That’s a 41 percent increase and the highest rate since the end of 2020.

Senior research fellow Zach Parolin said Black and Latino children are being disproportionately affected.

“In January 2022, one in every four Black or Latino children lived in monthly poverty, according to our estimates,” Parolin said.

Child tax credit payments were given to families from July to December of last year as part of the American Rescue Plan. The Internal Revenue Service paid out $250 per child aged 6 to 17 and up to $300 per child aged under 6. The payments reached more than 61 million children in over 36 million households.

“A massive policy success in terms of its impact on child poverty, in terms of its impacts on food hardship, and the evidence also suggests that at least for the six months that the policy was around, it didn't do much at all to affect rates of unemployment among parents who were receiving it,” Parolin said.

Robert Campbell, the senior Robert Campbelldirector of policy with Feeding America, says any resource to help get food on the table is important.

“While we can't speak directly to how individuals are using their child tax credit resources, we do know that households with low incomes often spend a large portion of their budget on food, upwards of 30 percent," Campbell said, "And we also know that food-insecure families often have to make tough choices between things like food versus rent or food and medicine.”

Despite the program’s success, there is no momentum to restore the child tax credit payments in Congress. Senators are split on whether to add a work requirement for families who receive the money. Regardless, both Campbell and Parolin say that investing in the country’s most vulnerable lifts everyone up.

“If you're low-income family, you receive these benefits when you have a young child, that child is less likely to face hardship and therefore is more likely to do better in school to go on and graduate high school and to experience a number of long-run benefits as a result of this policy,” Parolin said.

 

ALBUQUERQUE, N.M -- As difficult as it can be supporting two kids as a single mother, Melissa Martinez says her children are her motivation in life.

“I'm glad that they have each other," Martinez said. "They're a handful.”

Working a minimum-wage job, she says it can often be a struggle to put sufficient food on the table.

“They love their juice, they love their milk, and at one point there was a time when they were limited to resource of milk and formula when he was little, that was scary,” Martinez said.

Martinez isn’t alone. Research analyst Derek Lin with New Mexico Voices for Children says food insecurity was already a big issue in the state of New Mexico and across the county. The pandemic made it worse.

“In New Mexico, before the pandemic, 1 in 4 children suffered from child food insecurity after the pandemic started," Lin said. "That rate went up to 1 in 3.”

In recent months, Martinez says life has been made a little easier thanks to child tax credit payments that were expanded under the American Rescue Plan.

According to U.S. Census data, about 35 million eligible families received the first monthly payment of up to $300 for each child ages 5 and under and up to $250 for each child ages 6 to 17.

“What the administration and Congress did in recent legislation was make available those payments in monthly installments to low-income families, up to $300 per month, and those payments started in July, and we've already seen a very significant impact on food insecurity," said Geoffrey Plague, managing director of tax public policy and government relations with Feeding America.

Plague says the percentage of families indicating inadequate access to food dropped by 24%. Lin says more money in the pockets of families facing poverty can help end the cycle.

“When children aren't able to access enough high-quality food, they're not able to perform well in school," Lin said. "They're not able to do extracurricular activities. There are correlations between food insecurity and academic, behavioral and emotional issues.”

He says if they can’t do well in school, then it's difficult to go on to higher education and a life of better resources. Martinez says she hopes her kids can break that cycle.

“How do we offer them the best when some of us are so limited," Martinez said. "The workforce is hard because we're, we're striving to make the best of those minimum wage jobs, but we can't afford to make ends meet when we have to pay for back to school items. I don’t want them to remember that I struggled. I don’t want them to remember that it was hard for me. I want them to remember that they had really good things."

Martinez says the extra help is needed to be financially stable in a single-income household and she hopes the child tax credit payments will continue.

The current payments will continue monthly through December, but Feeding America is pushing for those payments to become permanent.

“The child tax credit has, for the history of it, for the entirety of its existence, proven to be one of the most effective anti-poverty provisions that we have at the federal level," Plague said.

For now, Martinez is taking it one day at a time. She says she’s thankful the tax credit has helped her give her children adequate food and clothing.

“We bought him new shoes, new sketchers, they even light up,” Martinez said.

CINCINNATI —

Some police departments across Greater Cincinnati are now seeing a surge of identity theft reports linked to unemployment fraud.

People said they're finding out something is wrong when they receive a tax form in the mail.

Officials said there are steps you should take if you find one of those forms in your mailbox.

It's a problem that is unfortunately becoming more common by the day.

One police department we talked with said they had five new identity theft reports linked to unemployment fraud on Wednesday.

"Yeah, it's makes you mad," victim Al said.

Al only wants to use his first name to protect his identity from any further harm but found himself filing a police report for identity theft last week.

He got a 1099-G tax form in the mail for fraudulent unemployment payments but said he hasn't been unemployed at all.

Al said he called the Ohio Department of Job and Family Services and waited for more than an hour for help.

"They told me that they were going to put a flag on my account, as far as unemployment benefits go," he said.

He also said he checked with the three credit bureaus and his bank to make sure there wasn't anything suspicious happening there.

ODJFS said it has received 80,000 fraud reports online alone in two weeks.

One police report from our area showed a woman received, "A 1099 from Job and Family Services for collecting $23,000 in unemployment."

Another said a man told police there was a fraudulent claim for $16,000.

ODJFS Director Kim Henderson said the last three months of 2020, there were fraudulent traditional unemployment overpayments worth $2.3 million.

In just December, she said there were fraudulent pandemic unemployment assistance overpayments worth $330 million.

She described a surge when it comes to the 1099-G forms, pointing out that in January 2021, 1.7 million forms were issued compared to about 200,000 forms in January 2020.

"After we receive a report of potential identity theft, we will process the report, issue applicable fraud determinations and if necessary, issue a corrected 1099 form to the IRS," Henderson said.

Attorney General Dave Yost has asked congress to shield people in a scenario like Al's from paying taxes on the fraudulent funds, as more people catch on to the crime.

"I wanted to know who did it. I wanted to know how they did it. Who put the check in their hand or what address did it go to? And they couldn't help me," he said.

ODJFS said if this happens to you, you should report it immediately.

You can use a new online portal to address unemployment fraud by visiting unemployment.ohio.gov.

You can also call the new ID Theft Hotline at 1-833-658-0394.

Officials said you can file your taxes without the erroneous 1099-G form.

They also said you should take steps to protect your identity.

ODJFS recommends people take the following steps if you feel like you may be a fraud victim:

• Visiting the ODJFS unemployment website and click 'Report identity theft'
• Accessing the ODJFS fraud page at jfs.ohio.gov/fraud [jfs.ohio.gov] and clicking on the “Unemployment Insurance Claimant” button, which will take the victim to an online form to fill out
• Calling 1-800-686-1555 and pressing Option 1.
• Faxing information to 1-614-752-4808.
• Or sending ODJFS an email to ucbenprotest@jfs.ohio.gov.

If you are determined to be a victim of fraud:

• Follow all the steps above to alert ODJFS
• Review your credit report and place an initial fraud alert on your credit file
• File a police report
• File your taxes

CLEVELAND — Claudia Longo is not a procrastinator. She said every year, and she files her taxes early. This year she filed in February.

“We usually are pretty early filing. I don’t like waiting until the last minute,” said Longo. “It’s usually super fast, and the money is in the bank.”

But this year, of course, was not like past years.

In March, the American Rescue Plan became law stating that the first $10,200 of unemployment benefits would not be taxable income. When that happened, Longo’s tax preparer filed an amendment on her behalf.

“Apparently, after we did that, they announced the IRS was going to do everything automatically, with unemployment, but it was too late for us because we had already filed the amendment,” she said.

Five months later, Longo is still waiting for her refund.

“At the beginning, I was just checking my bank, and I thought, well, this is strange,” she said.

She’s called the IRS.

“You wait for an hour sometimes, and it kicks you out of the line. I mean, it’s very frustrating,” said Longo.

She’s called her accountant.

“He said, ‘There’s not a lot I can do. They’re going to give me the same answer that they’re giving to you, and they’re just processing it,’” she said.

She’s logged into IRS’s refund tracker more times than she can count.

“It said it hadn’t been processed,” she said.

She said she is owed about $7,500, which does not account for the child tax credits for her two children.

Meltrice Sharpe is a CPA and the managing partner of CLE Consulting Firm. Among other services, the firm files taxes for businesses and individuals. Sharpe said they, too, are inundated with calls from clients asking when they will get their tax refunds.

“People aren't getting the refunds that they're used to getting in less than 21 days,” said Sharpe. “It can be really frustrating, but the best advice we give people is patience.”

She said the IRS is backlogged, and the organization went into the 2020 tax season with backlogs from 2019.

“It's not that your tax preparer has done something wrong. It's just that there is a backlog,” she said. “The same hour or two that you would be on hold, we are on hold, we are on hold, as well. The same hangup you get, we’re going to get as well.”

Nearly 15 million people throughout the United States are waiting on tax refunds. She noted that the IRS's bad situation is made worse when you add in a pandemic and a labor shortage.

“You think about the IRS employees and what they've had to do over the course of the last year and a half, is process stimulus checks. They're changing tax code and tax laws consistently and constantly using antiquated systems,” said Sharpe.

She is frustrated, too.

“It’s an unfortunate situation. A lot of these people whose refunds are being held up really, really need their money,” she said.

Sharpe noted the best thing you can do is not to call the IRS because you most likely won’t be able to get through to someone who can sort out your situation, but said check on your refund status on the IRS website.

“It won’t give you, you know, why your reason is being held up, but it will tell you, in some instances, that they've received it, it's being processed, it's been suspended," Sharpe said.

Longo and Sharpe echoed the same sentiments about fixing the problem, noting it may be time for elected officials to step in and help.

“It's going to take funding to fund an updated, more efficient tax system. It's going to take funding to hire more people, thinking of potential innovative ways to do things by leveraging outsourcing, third party companies to help with this,” said Sharpe.

Longo reached out to Sen. Sherrod Brown’s office to see if he could help and spoke to a representative who she’s hoping can move things along for her.

“I feel like there’s not a lot I can do,” she said.

Sharpe said she is not confident that the backlog will go away anytime soon and thinks the sheer volume of unprocessed refunds will carry over into the 2021 tax season.

News 5 reached out to Sen. Brown and Sen. Rob Portman’s office for comment. Brown’s office has not gotten back.

A spokesperson for Portman said, “As a member of the Finance Committee, Rob shares the concerns about the backlog and has reached out to the IRS and encouraged them to fix their backlog and other customer service issues.”

The IRS said this:

The IRS is opening mail within normal timeframes. All paper and electronic individual returns received before April 2021 have been processed if the return had no errors or did not require further review. As of July 24, 2021, we had 14.7 million unprocessed individual returns. Unprocessed individual returns include the tax year 2020 returns such as those requiring correction [irs.gov] to the Recovery Rebate Credit amount or validation of 2019 income used to figure the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC). This work does not require us to correspond with taxpayers but does require special handling by an IRS employee, so, in these instances, it is taking the IRS more than 21 days to issue any related refund, and in some cases, this work could take 90 to 120 days. If, as a result, a correction is made to any RRC, EITC or ACTC claimed on the return, the IRS will send taxpayers an explanation. Taxpayers are encouraged to continue to check Where’s My Refund? [irs.gov] for their personalized refund status and can review Tax Season Refund Frequently Asked Questions [irs.gov].

How long you may have to wait: The IRS understands the importance of timely processing tax returns and refund issuance. We have processed all error-free returns received before April 2021 and continue to work on the returns that must be manually reviewed due to errors. We are continuing to reroute tax returns and taxpayer correspondence from behind locations where more staff is available, and we are taking other actions to minimize any delays. Tax returns are opened and processed in the order received. As the return is processed, whether it was filed electronically or on paper, it may be delayed because it has a mistake, including errors concerning the Recovery Rebate Credit, missing information, or suspected identity theft or fraud. If we can fix it without contacting you, we will. If we need more information or need you to verify that it was you who sent the tax return, we will write you a letter. The resolution of these issues could take 90 to 120 days, depending on how quickly and accurately you respond and the ability of IRS staff trained and working under social distancing requirements to complete the processing of your return.

What you should do: In most instances, no further action is needed, but you may check Where’s my refund, or you can view your account [irs.gov]. If you filed electronically and received an acknowledgment, you do not need to take any further action other than promptly responding to any requests for information. If you filed on paper, check. Where’s my refund? If it tells you we have received your return or are processing or reviewing it, we are processing it, but it may be under review. We’re working hard to get through the backlog. Please don’t file a second tax return or contact the IRS about the status of your return.

As for amended returns, there are some situations when that is appropriate:

Most taxpayers need not take any action, and there is no need to call the IRS. However, if taxpayers are now eligible for deductions or credits not claimed on the original return because of the excluded unemployment compensation, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

Taxpayers should file an amended return if they:

• did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion;
• did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion;
• are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.

Taxpayers do not need to file an amended return if they:

• already filed a tax return and did not claim the unemployment exclusion; the IRS will determine the correct taxable amount of unemployment compensation and tax;
• have an adjustment, because of the exclusion, that will increase any non-refundable or refundable credits reported on the original return;
• did not claim the following credits on their tax return but are now eligible when the unemployment exclusion is applied: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents, or the Advance Premium Tax Credit. The IRS will calculate the credit and include it in any overpayment;
• filed a married filing joint return, live in a community property state, and entered a smaller exclusion amount than entitled on Schedule 1, line 8.

Taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment, or payment offset for other authorized debts) and the amount of the adjustment.

Jessi Schultz at WEWS first reported this story.

CINCINNATI — The city budget is finally balanced, but it took $67 million of American Rescue Plan funding to make it happen. On Thursday, at the first public hearing for Cincinnati’s 2022 budget, groups made their case to receive a portion of what’s left.

But members of council are still uncertain about the city’s financial future. Decisions made in Columbus could radically change Cincinnati’s plans.

The issue: "There is significant uncertainty in the short term regarding the extent of income taxes,” said assistant city manager Chris Bingham.

Earnings tax, which funds a majority of Cincinnati’s city budget, can usually only be collected from people working within city limits.

During the pandemic, Gov. Mike DeWine signed an order allowing Ohio cities to collect the tax from people working remotely for local companies while living elsewhere.

RELATED: Remote workers want to stop paying city income taxes

That measure isn’t permanent, however. And if people don’t return to working in-person, inside city limits, the tax revenue they generated for local government will be lost.

Worst of all, from a local government’s point of view: The Ohio House and Senate are considering bills that would require cities to refund the remote workers who paid earnings tax during the pandemic.

“It would be absolutely devastating for a city like Cincinnati that is so dependent on the earnings tax,” said Councilmember David Mann, who chairs City Council’s budget and finance committee.

But Cincinnati would also have time to plan. Mann said he and his colleagues are ready to use American Rescue Plan money to fill the tax gap this year and next if necessary.

“It’s not like the money disappears the next day” if a new bill is passed, Mann said. “One of the things we did when we made estimates about how to use the stimulus money was to increase our contingency because of those issues.”

The city budget must be finalized and approved by the end of June.