With tax season upon us, residents are starting to receive their refunds and many are considering how they will use their much-needed refunds to pay down debt and make essential purchases for their families. Others may not realize that they are eligible for federal tax credits, like the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), and without local outreach strategies may miss out on these funds. Research has found that economically secure families are crucial to thriving municipal budgets. As such, municipal leaders have a critical role in helping their residents access refundable tax credits.
This tax season, families with two children who earned less than $49,399 (or less than $55,529 for married workers) are eligible for a credit of up to $6,164 for the EITC and up to $2,000 per child via the CTC. These funds will be welcome news for those that receive them, but sadly this year, the amount that residents receive could be less because Congress did not continue the CTC expansion. Additionally, those eligible taxpayers with no children will see reduced amounts to their EITC, going from $1,502 to $560.
Local leaders can significantly impact the benefits of tax time by sharing information about tax season; helping residents turn to trusted, regulated organizations for tax preparation, and connecting individuals to service providers that help them meet their basic needs while awaiting their refund. Specifically, municipal leaders can take the following actions.
Share information about available tax credits and where residents can secure tax preparation services for free
The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs through the Internal Revenue Service (IRS) offer free tax return preparation to qualified individuals. VITA is targeted at people making less than $60,000 and has been recognized for its accuracy and trustworthiness; it has saved individual clients hundreds of dollars that serve as lifelines for their families and provides direct support to local businesses when families spend those dollars. The TCE program offers free tax help to those who are 60 years of age and older and are specialized in questions about pensions and retirement-related issues unique to seniors. Local leaders can share information about VITA and TCE sites within their community via city webpages, newsletters, targeted mailers, or social media. Local leaders can find more information on VITA and TCE sites operating within or near their municipalities.
Strengthen partnerships with financial institutions
The IRS has noted that individuals who file their taxes electronically and with direct deposit will receive their refunds faster than those who do not. Connecting residents with financial institutions such as community banks and credit unions can offer individuals access to safe products such as a bank account that will allow them to receive their refund via direct deposit. Additionally, many of these partners may be able to provide additional services, such as access to credit-building products or no-fee cash advance products that will allow residents to meet their short-term needs and build long-term financial stability.
Connect with local service providers to create a “go-to” list for residents
Individuals who file taxes and are scheduled to receive the EITC or CTC will not receive their payment until at least mid-February because of federal law. As such, many residents with children could need additional assistance or services until their refund arrives. Municipal leaders can work with local community-based organizations or nonprofit partners to create a living document that discourages residents from acquiring predatory refund anticipation loans with high-interest rates and notes the services and programs that residents can access to help them stabilize while they await their refund. Local leaders could also repurpose and update any lists they created at the height of COVID.
Actions that local leaders take to help their residents become aware of the EITC and CTC and the partnerships they can make with financial institutions and community providers can help strengthen residents’ budgets through these challenging times. Local leaders are an essential part of this work and, through outreach efforts, can simultaneously help residents, local businesses, and their municipal budget.
Tax Time Resources
The National League of Cities has created materials your municipality can use to help create a campaign to support more of your residents’ secure refundable tax credits. With input from NLC members, the Consumer Financial Protection Bureau (CFPB) has created tax time videos for residents that can be played in waiting areas on tax preparation and online tax preparation, a guide to filing taxes in 2023, which can be shared in resident newsletters, and a social media messaging calendar that can be used throughout the tax season to help your residents secure essential tax credits.
2023 Tax Time Survey
NLC wants to learn more about your municipality’s efforts to support residents accessing tax credits like the Child Tax Credit and the Earned Income Tax Credit in 2023. Take 5 minutes to complete our short survey.