This tax relief helps people with low incomes. Too many people don’t understand. – Center for Public Integrity
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For families in financial difficulty, refundable tax credits can make the difference between covering rising rent and food prices or not covering them. But not everyone who is eligible gets them.
According to Internal Revenue Service data from 2018, the most recent year for state take-up rates, 22% of taxpayers eligible for the federal earned income tax credit did not claim it. It varies a lot by state, from around 17% in the Dakotas and New York on one side to over 25% in Alaska, Oregon, California, Colorado and Washington State on the other. .
Missed funds worry advocates because the credit is one of the nation’s biggest anti-poverty programs.
“It puts more money in the pockets of low-income workers,” said Juan Carlos Ordóñez, director of communications at the Oregon Center for Public Policy. By not claiming it, “it makes their life more difficult than it should be”.
It’s not too late for some missed credits. You can still claim the earned income tax credit for the 2019, 2020 and 2021 tax years if you are eligible, either by filing a tax return or an amended return.
The credit, enacted in 1975, is targeted at low to moderate income working households. This reduces the taxes you owe and could increase your refund.
For the current tax year – 2021 – adults who earn up to $57,414, have limited investment income and a social security number may qualify for credits ranging from approximately $1,500 to 6 $700, depending on their filing status and number of dependents.
The 2021 US bailout expanded earned income tax credit eligibility to many more childless adults, but only for the current tax year.
Because that provision has expired, an estimated 5.9 million childless adults will bear a tax burden that pushes them into or deeper into poverty, according to the Center on Budget and Policy Priorities.
Wondering if you qualify for help? An IRS tax credit calculator clarifies eligibility and refunds can be tracked through the IRS2Go app. Individuals who have applied for extensions have until October 17 to prepare and file their income taxes with free tax preparation software using IRS Free File. Seniors, people with disabilities, limited English speakers, and those earning up to $58,000 are eligible for free tax preparation services offered by the IRS.
Taxpayers most at risk of losing the earned income tax credit are those who live in rural areas, without children, with limited English skills, people with disabilities and Native Americans, according to the IRS.
In Oregon, about 75,000 eligible families did not claim the tax credit in 2018, a combined loss of $84 million, according to an analysis by the Oregon Center for Public Policy.
The state’s large rural sections and lack of culturally appropriate information for different populations may explain the low claim rate there, Ordóñez said.
Ignorance of the existence of the tax credit may also be the cause of low participation rates.
“The IRS and its partners nationwide regularly urge people to check whether they are eligible for the earned income tax credit, and also urge people who do not normally file taxes to check whether they are eligible,” IRS spokesman Eric Smith said in an email.
The agency holds an annual tax credit “awareness day” in January, with nationwide activities. Partners, including schools, businesses and community organizers, have held hundreds of live events in previous years.
Eligible workers “lose thousands of dollars every year if they don’t file and claim it,” Smith said.
The Oregon Center for Public Policy has ideas for how its state could increase participation: public investment in free tax preparation services to make it easier for people to claim this credit and any others they might be entitled. Offering personalized, pre-populated tax returns that residents could accept or modify would also be helpful, Ordóñez said.
“For many people whose only source of income is their wages, the Department of Revenue knows how much they earn and if they qualify for the EITC,” Ordóñez said. “It’s our civic duty to file taxes, but it’s the government’s duty to make it easy for everyone.”
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