Extending the EITC to Noncustodial Parents: Potential Impacts and Design Considerations. B. Definition of "Full Payment"

05/23/2009

Our estimates assume that a noncustodial parent would meet the “child support eligibility” requirements for an NCP EITC if he or she pays at least as much child support during the year as accrues during the year. This is the definition of full payment used by New York and Washington, D.C. Under this definition, the noncustodial parent can have arrears that accrued in prior years, as long as an amount equal to the current year’s support has been paid. Payments can include current support and/or arrears—as long as the total equals or exceeds the amount of current support due during the year.

Alternative definitions of full payment—such as requiring that each month’s child support be paid in full and on time—would increase administrative complexity and reduce the number of noncustodial parents eligible for the NCP EITC. Many noncustodial parents who pay child support have arrears, so denying the NCP EITC to noncustodial parents with arrears would also reduce eligibility.[22]

On the other hand, an NCP EITC does not have to be limited to those who pay their full child support. Many low-income noncustodial parents face employment barriers and job instability that can make full payment difficult to achieve. Noncustodial parents with multiple children (and thus higher child support orders) may find it more difficult to make full payment than noncustodial parents with one child and similar earnings. Allowing noncustodial parents who pay partial support to receive at least some benefit from an NCP EITC would extend the benefits and incentives of an NCP EITC to a broader population (Mincy 2008; Primus 2006).

Administrative timing issues should also be considered when developing an NCP EITC. In New York, noncustodial parents whose employers did not report 2006 child support payment information until 2007 were initially denied the credit.[23] Those who appealed the decision were later able to claim the credit (Sorensen forthcoming). Policymakers could consider possible measures to reduce these problems, such as requiring full payment for a period other than the tax year or excluding amounts due from the final paycheck when determining whether full payment has been made.

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