Examining the impacts of COVID-era direct payments during the transition to adulthood

What is the agency priority?

In 2020 and 2021, the Internal Revenue Service (IRS) issued $931 billion dollars in direct payments to individuals to reduce financial stress brought on by the pandemic.¹ Economic Impact Payments (EIPs) and the Expanded/Advance Child Tax Credit (E/ACTC) were the largest stimulus payments made to individuals in recent history and income eligibility for these payments was nearly universal.² Priorities of the IRS include understanding how tax policies affect people and the economy, and understanding tax filing behaviors in order to improve tax administration.³

What did we evaluate?

We will evaluate whether eligibility for these COVID-era payments impacted college enrollment decisions and tax filing behaviors among young adults and their families. Access to tax benefits when families are making college choice decisions appears to influence young adults’ decisions to enroll in college.⁴ Take-up of benefits also tends to increase as the expected benefit amount and information about benefits increases.⁵ Families with qualifying teenage dependents could receive up to $1,100 in additional tax benefits from the first and second EIPs, and up to $3,000 in additional tax benefits from the E/ACTC. To evaluate the effects of these programs, we will use individual-level tax data to compare outcomes for households with qualifying teenage dependents who were just young enough to be eligible to receive the benefits to otherwise similar households with teenage dependents who were slightly too old to receive the benefits. We also will examine the extent to which the impacts of eligibility for these programs differ for different taxpayer segments.

How did the evaluation work?

Analysis plan forthcoming.

What did we learn?

This evaluation is currently being implemented and is part of our American Rescue Plan portfolio. Results forthcoming (2024).

Notes:

1. Stimulus Checks: Direct Payments to Individuals during the COVID-19 Pandemic
2. The Child Tax Credit: The Impact of the American Rescue Plan Act (ARPA; P.L. 117-2) Expansion on Income and Poverty.
3. Statistics of Income–Joint Statistical Research Program Call for Proposals.
4. Manoli, D., & Turner, N. (2018). Cash-on-hand and college enrollment: Evidence from population tax data and the earned income tax credit. American Economic Journal: Economic Policy, 10(2), 242-271.
5. Ko, W., & Moffitt, R. A. (2024). Take-up of social benefits. Handbook of Labor, Human Resources and Population Economics, 1-42.