How Well Can Limited Data Predict Annual Tax Credits: The Importance of the Earned Income Tax Credit, Child Tax Credit, and An Option for Advancing Credits

Using data from the 2018 Survey of Income and Program Participation (SIPP, which has monthly income amounts for 2017) and the National Bureau of Economic Research TAXSIM model, we estimate how accurately data from the first quarter of the year can predict credit amounts a person will ultimately qualify for based on their annual characteristics. Low-income people are more likely than higher-income people to experience financial difficulties, so we focus our analysis on families with children at some point in the year with incomes below 200 percent of (twice) the federal poverty level (FPL). If credits can be accurately predicted using data from the first quarter of the year, it may present a path forward toward advance payments of credits.