1

Promote the Earned Income Credit

And Child Tax Credit

Date: Tuesday, February 26, 2013

Presentation by: Roxy Caines

Organization: Center on Budget and

Policy Priorities

Phone: 202-408-1080

Email: caines@cbpp.org

Web: www.eitcoutreach.org

2

What are the Earned Income Credit (EIC) and the Child Tax Credit (CTC)?

Federal tax benefits for low-income working families and individuals

Purpose: Offset income and payroll taxes

Supplement wages

Provide a work incentive

Key Features: Reduces taxes workers may owe

Even if workers don’t owe taxes, they may be eligible

Some families can claim both credits

3

Tax Credits: Reduce PovertyThe EIC & CTC Lift More than 9 Million

Above the Poverty Line

2011

4

Tax Credits: Making a Difference

Why Conduct Tax Credit Outreach

Activities?

5

Why is Outreach Needed?

6

80% Claim EIC 20% Do Not Claim EIC

EIC Eligible Workers

7

Why is Outreach Needed?

Over $10 billion in EIC refunds mayhave gone unclaimed in 2010

Efforts are needed to ensure eligible workers

know how to claim the EIC and other tax credits.

8

How Much Can Workers Earn and Still Qualify for the EIC?

Income limits for married workers are $5,210 higher than these amounts.

Workers not raising children must be between the ages of 25 and 64.

Investment income cannot exceed $3,200.

Number of children:

Income less than: EIC up to:

3 or more children $45,060 $5,891

2 children $41,952 $5,236

1 child $36,920 $3,169

No children $13,980 $475

For Tax Year 2012:

The Federal EIC in Tax Year 2012

9

10

How Much Can Workers Earn and Qualify for the CTC?

Workers who earned more than $3,000 in 2012 can get a CTC refund.

Income less than: Filing status:

$110,000 Married

$75,000 Single or Head of Household

$55,000 Married filing separately

The CTC is worth up to $1,000 for each qualifying child.

11

Who Qualifies for the EIC and CTC?

Workers who are: Working full-time, part-time or self-employed Also receiving public benefits Single or married Raising a “qualifying child”

Some very low-income workers without a “qualifying child” may be able to claim the EIC

Immigrants legally authorized to work

CTC ONLY: Immigrant workers with Individual Taxpayer Identification

Numbers (ITINs) Some non-custodial parents

12

Definition of a “Qualifying Child”

If you are a qualifying child, you cannot claim the EIC yourself.

If a child is claimed for both the EIC and CTC, the same worker must claim both credits.

EIC CTC

Relationship

Son, daughter, grandchild, stepchild, adopted child, brother, sister, stepbrother, stepsister (or their descendents) or foster child placed by a government or private agency

Residence Must live with worker in the U.S. for more than half the year

Age Under 19 or 24 if full-time student or any age if totally and permanently disabled

Under 17

Do the EIC & CTC Count as Income for Other Public Benefits?

No federal tax refund counts as income for any program with federal funding

Refunds that are saved do not count against resource limits for 12 months after the refund is received

13

14

How do Workers Use the Tax Credits?

15

Medical Expenses

TransportationRent & Utilities

Basic Needs

Child Care

Auto Repairs

The credits help workers keep working and care for themselves and their children.

Workers Use the Credits to…

How do the Credits Work?

16

17

What Counts as Earned Income?

Includes:

Wages, salaries, and tips

Net earnings from self-employment

Union strike benefits

Employer-paid disability benefits

Military combat pay

Doesn’t Include:

Non-taxable earned income Payroll deductions for dependent

care or retirement plans

Public benefits Social security, SSI, welfare

Other income, such as: Unemployment Alimony and child support Interest on bank accounts Investment income

18

Meet Maxine

She earns $19,000 this year.

$270 in income tax has been withheld.

Maxine is a single mom raising a 6-year old son.

Question:

How much is Maxine’s total refund?

A. Less than $1,000

B. $2,000 - $3,000

C. $3,000 - $4,000

D.$5,000 or more

19

20

Maxine’s Tax Refund

EIC $ 2,864

CTC + $ 1,000

Total Tax Benefit $ 3,864

21

How Do You Claim the Credits?

You must file a tax return! Form 1040 or Form 1040A – not 1040EZ EIC - Schedule EIC CTC - Schedule 8812

Workers not raising children can file any form

Eligible workers can claim EIC and CTC refunds for up to 3 previous years

22

Filing for Free

23

Average fees range from $85 - $120 for e-filing.

EIC Claimants

When it’s time to file a tax return, many workers seek help from a commercial tax preparer.

The High Cost of Commercial Tax Preparation

24

What are RALs & RACs?Refund Anticipation Loans (RALs)

Very high-interest loans Interest rate can be > 180 percent; processing fee can

be $80 or more No guarantee refund will equal the loan

amount

Refund Anticipation Checks (RACs) Replacing usage of RALs

Temporary bank account established to receive refund and issue as a check

No faster than direct deposit

25

Are There Alternatives to RALs and Commercial Tax Preparation?Volunteer Income Tax Assistance (VITA)

Free tax filing help for low-income workers at community sites. IRS Toll-free Locator: 1-800-906-9887

In many communities across the country

Volunteers are trained under IRS guidance

Taxpayers can receive refund in 7-12 days through e-filing

VITA and TCE sites are listed at www.irs.gov (key word search “VITA sites”)

26

How Can You Conduct Tax Credit Outreach

Activities?

27

NAACP Units & State Conferences Can Help Promote the Tax Credits

You do NOT have to be a tax expert to help families claim their credits.

Incorporate outreach activities into your routine work – and encourage your partners to do the same.

Build partnerships to expand your outreach efforts.

28

Notify Workers in the Community

Alert workers about the EIC and CTC and provide the basic information they need:

Eligibility guidelines How to find tax forms VITA site locations Help getting an SSN or ITIN

Print messages about the tax credits and free tax filing assistance

Newsletters Outreach materials

Provide referrals to existing free tax preparation sites

Inform & Engage Your Network

Feature the tax credits as the topic at your next meeting or training session

Use technology Add a button/ badge and link to your website Include the tax credits in your electronic signature and invite

others to do the same. Examples: Help working families get all the money they earned!

The Earned Income Credit is a tax benefit for people who work. Tell workers how to claim it and other valuable tax credits that may provide a financial boost.

Do you know about tax benefits for people who work?

Share resources that partners can pass on to others Tax Credit Outreach Website Quick Guide to Popular Online Resources Outreach materials: posters, flyers, envelope stuffers

29

30

Collaborate with Community Groups

Inform partner agencies about the EIC and CTC

Partner with organizations that provide other resources and services

Public benefits, housing assistance and family counseling programs

Coordinate a free tax help day or tax credit awareness event

Invite partners to share tax credit messages on social

media platforms Sample messages for FaceBook & Twitter

31

Connect with a Tax Credit Outreach Coalition

There may be one in your area!

The National EITC Partnership website:www.cbpp.org/eitc-partnership

Directory of local partnerships by state Spreadsheet with coalition members and the chairperson to contact

Goals and activities of the coalition

IRS Territory Manger contact

32

The Center on Budget and Policy Priorities’ National Tax Credit Outreach Campaign Can:

Deliver technical assistance and support

Present more in-depth training about the tax credits and conducting local outreach activities

Connect you to online resources:

Tax Credit Outreach Kit

EIC/CTC flyers in 21 languages

Envelope Stuffers

Color Posters

EIC Estimator

Searchable Outreach Strategies Database

Sample Press Release

EIC & CTC FAQs and much more!

www.eitcoutreach.org

33

34

Use the Brookings Institution EITC Website to Localize Your Efforts

www.brookings.edu/projects/EITC.aspx

All filers OR all EITC filers

Zip Code-level data

Search by counties, municipalities, districts, etc.

Multiple variables

Tax Year 2010 on website now

Question:What is the first thing you will do to promote the EIC, CTC and free tax filing assistance?

A. Distribute information to workers (flyers, envelope stuffers, post cards or newsletters)

B. Share resources with partners at a meeting or electronically

C. Post outreach info online through social media platforms

D. Volunteer at a VITA site and encourage others to do the same

E. Partner to coordinate a free tax help day or awareness event

F. I do not plan to promote the EIC, CTC and free tax filing assistance at this time

G. Other35

Q&A

36