Every January we turn the page to a new year and a fresh start. For those of us in the financial empowerment space, it also means the start of tax season. Millions of Americans use their tax refunds to pay off debt, purchase something for their children, and, when possible, even save for the future.
In 2020, 22 million eligible workers and families received about $57 billion by claiming the Earned Income Tax Credit (EITC). In 2021, the maximum credit available for families with three or more children is $6,660. The overall tax refund that includes the EITC will be the largest single payment that working parents get during the year.
Despite this, roughly 20% of eligible taxpayers don’t claim the federal EITC every year. That means many residents are leaving money on the table– flexible funds they can use to stabilize their family budgets and through their spending boost local economies.
Local leaders can make a big impact during tax time by helping their residents understand the tax-related changes taking place and where to go for help. Specially, municipal leaders can take key actions for their residents during this time by:
Increasing Awareness and Supports Around Delayed Refunds
The IRS has announced that the tax season will now start on February 12. This push back means that tax refunds that include the EITC will be released later than normal – in early March. Local leaders should share this information with their residents now and help connect them with supportive services while they await their refunds.
Partnering with Volunteer Income Tax Assistance Programs
The Volunteer Income Tax Assistance (VITA) program operates throughout the country offering free tax preparation services to tax filers making less than $57,000. VITA, widely regarded for its accuracy and trustworthiness, has saved individual clients hundreds of dollars that serve as lifelines for their families and support for local economies.
Roughly 20% of eligible taxpayers don’t claim the federal EITC every year. That means many residents are leaving money on the table– flexible funds they can use to stabilize their family budgets and through their spending boost local economies.
Like many important services around the U.S., VITA has been interrupted due to COVID-19. However, the pandemic also provided VITA an opportunity to scale services for the digital age. The non-profit organization, Code for America has supported VITA partners through the creation of GetYourRefund.org. GetYourRefund.org allows tax fillers to review their tax situation with simple questions, securely upload their tax documents, and get connected with VITA to answer their questions. VITA teams remotely prepare tax returns, review returns with tax filers and file the returns with tax filers’ consent.
Local leaders can share information on local VITA partners to help spread the word on these helpful resources among the community and can spotlight GetYourRefund.org among residents.
Highlighting Lookback Provision for EITC and CTC Eligibility
In 2020, millions of people experienced reduced work hours or lost their jobs. As part of the pandemic relief bill, impacted individuals will be able to ‘lookback’ and use their earned income from 2019 to determine eligibility for and the amount of their EITC and Child Tax Credit (CTC). Municipal leaders can help highlight this opportunity with residents — that if their income levels changed in 2020, that they can still claim the EITC and CTC based on their 2019 wages.
Educating Residents about Stimulus Payments Catchup
The first round of stimulus payments that were sent out last summer was an advance on the Recovery Rebate Credit (also known as the Economic Impact Payment). Like the EITC and CTC eligibility, local leaders can increase awareness in their communities that residents who didn’t receive their payment (or payment for a dependent) can still receive that payment by claiming the credit on their tax return
Tax season offers local leaders an opportunity to help residents claim refundable tax credits that can provide financial support during challenging times. President-elect Biden’s American Rescue Plan calls for the continuation of the ‘lookback’ provision for impacted workers in 2021 and temporarily boosting the CTC and increasing the EITC for adults without children. This will be something to watch as he enters the office.
Spread the word
Ahead of EITC Awareness Day on January 29, NLC’s YEF Institute is offering a communication toolkit that cities can use to connect with local partners and promote the EITC to residents.