That’s why the IRS started EITC Awareness Day, a day dedicated to encouraging organizations to bring attention to the EITC and free tax filing assistance. This year, EITC Awareness Day will take place on Friday, January 30.
The EITC is a refundable federal tax benefit for lower- and moderate-come workers that can be worth up to $5,143. To find out how much money a worker might receive, check out this quick EITC estimator.
To claim the credit, one must file a tax return. Free tax filing assistance is available through the IRS sponsored programs VITA (Volunteer Income Tax Assistance) and TCE (Tax Counseling for the Elderly). Click here to find a site in your area.
No sites nearby? There’s another option! MyFreeTaxes allows taxpayers with household income less than $60,000 to file federal and state tax returns online for free. Visit www.myfreetaxes.com to learn more.
On tax deadline day, we want to put a spotlight on a proposal contained in the President's 2015 budget that would expand the federal Earned Income Tax Credit (EITC) for lower-income, childless workers.
As quick background - the federal EITC is a fully refundable[i] tax credit that is targeted to support low- to moderate-income workers. The credit becomes available to workers with their first dollar of earned income, peaks at certain predetermined amounts (which are based on marital status and family size), and phases out until it eventually reaches $0 for higher income earners.
The EITC has been routinely cited as a highly effective tax policy that both encourages and rewards work - and has seen support from both the left and right. Research shows that the credit produces major long term benefits for children that go well beyond a single tax year -- this study finds that children in families who receive the EITC have higher test scores, fewer teen births, and live in better neighborhoods as adults.
However, the EITC falls short, and should do more, when it comes to supporting young and childless workers. Childless workers under age 25 are completely ineligible for the credit and the average credit for qualifying workers between 25 and 64 is less than one-tenth the average credit for families.
Yesterday the Center on Budget and Policy Priorities created an infographic that further demonstrates the problem with the current structure of the EITC:
The Center has found that childless workers are in fact the only group that are pushed further into poverty as a result of the federal tax code.
In his 2015 Budget, the President has proposed reducing the qualifying age to 21 and raising the credit amount available to childless workers (from a max of $500 to a max of $1,000). The President's proposal also raises the phase out point for the EITC for these workers from $15,000 to $18,000. There are also several proposals before Congress that would expand the EITC beyond the changes proposed in the President's budget -- potentially creating even larger credits for these workers.
A change to the federal EITC could also bring a change to our state's EITC -- Connecticut is one of 21 states (there are total 26 states with a state EITC) that sets its tax credit as a percentage of what is offered on the federal level. We know that the combination of a state EITC with the federal credit helps bring an even larger number of families out of poverty. We should be extending this same opportunity, at both levels, to our young and lower-skilled workers who we know are facing an extremely difficult time in this economy and in this job market.
We call on politicians in Washington to adopt these measures, and to provide much needed support to these working Americans.
[i] A fully refundable tax credit is one where a payment will be made by the IRS directly to the taxpayer in the event that the amount of the credit exceeds the individual's income tax liability.
Statement from our Executive Director, Jim Horan, on House and Senate Passage of a Raise to the Minimum Wage (Senate Bill 32)
Hartford, CT - Today, both chambers of the Connecticut General Assembly passed SB 32, a bill which increases the state's minimum wage to $10.10 by 2017 and provides a meaningful raise to our lowest income families. With these votes, SB 32 is now being transmitted to the Governor, and once signed, the State of Connecticut will have the highest enacted minimum wage in the country. We applaud our state lawmakers for their leadership on this issue, and for providing a strong example to the rest of the country and Congress.
This increase in the minimum wage will directly help 140,000 workers, many who are women with children, move out of poverty. Under Connecticut's current minimum wage of $8.70, a minimum wage worker working full time, 52 weeks a year, earns only $18,096 a year. The federal poverty level for a family of three (for example a mother, and two children) is $19,790. With the increased minimum wage of $10.10, this same mother will now earn $21,008 a year. This higher wage means greater financial stability for families, reduced need for government safety net programs, and higher earnings for students who are working to pay for college.
We thank Governor Malloy for his leadership on raising the minimum wage to $10.10 and the members of both the House and Senate for passing Senate Bill 32. Connecticut is a leading state in addressing poverty and promoting economic success through progressive policy change, including the state EITC and paid sick days, and now this increase in the minimum wage.
The Connecticut Association for Human Services (CAHS) is a nonprofit policy and program organization that promotes family economic security strategies to empower low-income working families to achieve financial independence. Our mission is to end poverty and engage, equip, and empower all families in Connecticut to build a secure future.
Yesterday afternoon President Obama stopped by Central Connecticut State University in New Britain where he made his case for increasing the federal minimum wage to $10.10 (current federal minimum wage is set at $7.25, Connecticut's minimum wage is $8.25). Flanked by Governor Dannel Malloy, as well as the Governors from Massachusetts, Vermont, and Rhode Island, the President called on Congress to "give America a raise" and highlighted how the increase would help women and young people.
In our previous post, we discussed the the benefit a wage increase has on both our lowest-earning workers and the state's budget. Several news reports following the event, that can be viewed here and here, featured quotes from Democratic lawmakers indicating the high probability of the legislature passing a minimum wage increase during this legislative session. Tom Foley, the likely Republican candidate in this fall's governor's race, has stated he favors a minimum wage increase. There is also overwhelming public support, with the latest Quinnipiac poll showing voters backing the measure 3-to-1.
An increase in the minimum wage is an important first step in helping our state's families move out of poverty and towards economic security. In future posts, we will discuss other aspects of the President's economic agenda for 2014, which includes a more robust earned income tax credit with new support for single adults, additional job training programs, and expanded early childhood education opportunities.
If you are looking for some effective policy proposals to help low income families thathappen to have broad bipartisan support, Washington has not been the best place to look of late. After the SNAP cuts approved last week in the House, it is hard to believe there is much interest in helping low income families in the short term.
There is one policy that it is both very effective and that has been receiving plaudits from both sides of the aisle of late, however: the Earned Income Tax Credit, or EITC. The Center on Budget and Policy Priorities has a great article about the EITC, a policy that both works and has some Republican Senators arguing that it need to be expanded. The data certainly shows its effectiveness:
Next to Social Security, the EITC combined with the refundable portion of the Child Tax Credit constitutes the nation’s most powerful anti-poverty program. These two credits lifted 10.1 million people out of poverty in 2012, including 5.3 million children (see chart). As AEI’s Michael Strain points out, the EITC “is a very effective anti-poverty tool because it supplements earnings and incentivizes employment. Expansions of the EITC have been very successful at encouraging work, particularly among single mothers during the 1990s.”
We were very vocal, in fact, arguing for a state EITC. The state tax credit was cut last year due to the tough budget situation from 30 to 25% of the federal refund. Governor Malloy has promised restoring the state EITC to 27.5% this budget year (and to 30% in 2015), and CAHS will work to ensure this program is restored.
CAHS, through our very successful VITA program, has also worked for years to make the help families get access to the program. You can learn more about our VITA program here - and get information on all sites in the state by calling 211.
That´s the title of today´s editorial on the Hartford Courant, a very strong, forceful defense of the Connecticut Earned Income Tax Credit. The message is clear:
The earned income tax credit, or EITC, is one of the best domestic policy tools ever invented. Since it can only be claimed by people who work and pay taxes, it encourages and rewards work. It keeps low-income wage earners out of poverty. The money saved goes right back into the local economy.
It would be a shame to cut it, even temporarily.
The article goes on quoting the excellent study from CT Voices for Children on who gets the credit and its effectiveness. We do believe that the EITC is one of the best, if not the best, anti-poverty policies that the state has. The Courant is right: it should be preserved.
Last week we learned from some of our partner VITA sites (CAHS coordinates a very active, statewide VITA network - one of our best programs!) that some families that were eligible for the Connecticut Earned Income Tax Credit (EITC) were having some issues. After filling taxes and being approved by the IRS for the Federal EITC, they were getting lette
rs from the Connecticut Department of Revenue Services (DRS) asking them for additional paperwork before they could approve the state EITC.
This is by itself not unusual; we know some people do forget to bring some documents, and it is natural that they do get one of these requests. What we found surprising was the amount of fillers receiving these letters; some VITA site coordinators were reporting that 10% of their clients has come back asking for more information, a clear signal that this was more than a few isolated cases. We reached out to Kevin Sullivan, the DRS Commissioner, for more information, as the number of letters seemed unusual.
Well, it was. It turns out that DRS sent out about 14,000 of these letters by mistake; the fillers are indeed eligible for the Connecticut EITC, and they should not have received that request for additional documentation. We are glad that DRS quickly detected the problem, and that they will send letters to those fillers correcting the mistake, as well as their tax refund.
So, if you are a Connecticut EITC filler and got a letter asking for more documents to be send in 30 days or less, hold tight. Probably a DRS glitch at work.
We all know the EITC lifts children and working families out of poverty, and is one of the single-most effective policy tools to help stimulate our economy while investing in our future workforce.
A new post by Elizabeth Kneebone of the Brookings Institute examines the Census Bureau’s new Supplemental Poverty Measure for a more nuanced look at the impact of the EITC and the Child Tax Credit, and finds they are even more effective that expected, lowering child poverty by 6.3%.
In the upcoming 2013 tax season, please ask your clients and contacts to share what they'll do with THEIR EITC.
Groceries? New shoes? School field trips?
Please share any stories, or filers willing to be profiled, with me at firstname.lastname@example.org. We'll be collecting testimonials to educate lawmakers about how much of a difference CT EITC makes to working families.
Also, CAHS and other Volunteer Income Tax Assistance (VITA) site operators will soon be offering free tax preparation. Please call 211 InfoLine for locations.
Don’t forget that town-by-town information on who claimed the CT EITC is here. Use the "find" function to locate a complete one-pager for your town.
More than 180,000 working families with incomes averaging $17,184 benefited from CT EITC. We have to remind lawmakers to protect this investment in the coming budget session!