This Friday, January 26, marks the twelfth annual Earned Income Tax Credit (EITC) Awareness Day, an effort by the IRS to encourage local governments, community organizations and other stakeholders to bring attention to the EITC and opportunities for free tax filing services through Volunteer Income Tax Assistance (VITA) sites. These efforts bring billions of federal dollars into local economies.
As tax season gets underway, cities have a valuable opportunity to help low- and moderate-income residents increase their tax returns. Families with two children that earned less than $45,007 in tax year 2017 (or less than $50,597 for married workers) are eligible for a credit of up to $5,616.
Over the last 17 years, the National League of Cities Institute for Youth, Education, and Families (YEF Institute) worked with dozens of cities in implementing EITC outreach campaigns. These campaigns have helped to raise awareness and increase participation of low- and moderate- income residents.
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According to the Center on Budget and Policy Priorities, in 2015 the EITC reduced the severity of poverty for more than 21 million people, including millions of children. Despite the work by cities and community organizations, the IRS estimates one in five eligible families still fail to claim the EITC every year because residents may not know they are eligible or how to claim the credit.
When large numbers of eligible residents do not file for the EITC, their communities miss out on an opportunity to bring millions of dollars into the local economy. For the 2016 tax year, 27 million EITC tax returns were filed, paying out over $67 billion in benefits. On average, families received approximately $2,455 a significant amount for low wage workers.
For instance, the City of Boston’s Tax Help Coalition served 13,392 taxpayers through their VITA program and returned $26.5 million in tax refunds to residents. In Boston, taxpayers pay $200 to have their taxes done by commercial preparers. The work of the Boston Tax Help Coalition resulted in $2,678,400 being saved by local taxpayers who used VITA.
The City of Hattiesburg, Mississippi has a long history of supporting EITC outreach and VITA. The city’s past outreach strategies included the mayor going door to door to inform residents of the credit. The mayor also spoke to residents during high school football games about the opportunity the credit offered them and connected the opportunity with VITA. In 2016, these efforts resulted in 1,577 tax returns prepared and more than $1.5 million returned to the community.
EITC Refunds Delayed
With the passage of the Protecting Americans from Tax Hikes Act (PATH Act) the IRS is required to delay EITC or Additional Child Tax Credit (ACTC) refunds until taxpayer information has been verified. In 2018, this delay will result in taxpayers who claim the EITC or ACTC not receiving their refunds until at least February 27th. This delay could have impacts on taxpayers throughout the country who count on these dollars to pay down utility bills or make car repairs.
City leaders should make sure all taxpayers and partners are aware of this delay through city newsletters, television announcements or robocalls. Given this delay, city leaders could consider forgiving late fees for payments of parking tickets or utility bills.
For more information on EITC outreach efforts and VITA, please click here. To learn more about practical and accessible steps that city leaders can take to increase working families’ incomes by claiming the EITC, click here. To download NLC’s Toolkit on Maximizing the Earned Income Tax Credit, click here.
For more information on the nearest VITA sites near your city, click here or call 800-906-9887. Please note that the IRS phone line provides access to multiple languages. For more information about city-led EITC outreach campaigns, contact Patrick Hain at (202) 626-3099 or firstname.lastname@example.org.
About the author: Patrick Hain is principal associate for Financial Empowerment in the NLC Institute for Youth, Education, and Families.