This tax break helps people on low incomes. Too many don’t understand.

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Melissa Hellman

The Center for Public Integrity

For financially strapped families, recoverable tax credits can mean the difference between covering rising rents and food prices or not. But not everyone who is eligible gets them.

Corresponding Internal Revenue Service data 2018, Last year for state participation rates, 22% of taxpayers eligible for the state Earned Income Tax Credit did not claim it. That ranges very widely from state to state, from about 17% in Dakotas and New York at one end to more than 25% in Alaska, Oregon, California, Colorado and Washington at the other end.

The lack of funds worries proponents because of the credit one of the largest anti-poverty programs in the country.

“It puts more money in the pockets of low-income workers,” said Juan Carlos Ordóñez, communications director at the Oregon Center for Public Policy. By not stating it, “it makes their life harder than it needs to be”.

It’s not too late for some missed credits. You can still claim the earned income tax credit for tax years 2019, 2020 and 2021 if you qualify, either by filing a tax return or an amended return.

Introduced in 1975, the loan is intended for low- to middle-income working households. It lowers the taxes you owe and could increase your refund.

For the current tax year — 2021 —
Adults who earn up to $57,414, have limited capital income, and have a Social Security number may qualify for approximately $1,500 to $6,700 in credit, depending on their filing status and number of dependents.

The 2021 American Rescue Plan extended eligibility for the earned income tax credit to many more childless adults, but only for the current tax year.

As this provision expires, an estimated 5.9 million childless adults will face a tax burden that plunges them into or deeper into poverty. according to the Center on Budget and Policy Priorities.

Wondering if you’re eligible for help? A IRS Tax Credit Calculator clarifies eligibility, and refunds can be tracked through IRS2Go app. Individuals who have applied for extensions have until October 17 to prepare and file their income taxes using free tax prep software IRS-free file. Elderly people, people with disabilities, limited English speakers, and those earning up to $58,000 qualify free tax preparation services offered through the IRS.

Taxpayers most at risk of losing Earned Income Tax Credit include those living in rural areas without children, with limited English skills, people with disabilities and Native Americans, according to IRS.

In Oregon, about 75,000 eligible families did not claim the tax credit in 2018, for a total loss of $84 million. according to an analysis from the Oregon Center for Public Policy.

The state’s large rural parts and a lack of culturally appropriate information for different population groups could account for the low application rate there, Ordóñez said.

A lack of awareness of the existence of the tax credit can also account for low participation rates.

“The IRS and partners across the country regularly urge people to verify that they qualify for the earned income tax credit,
and also urge people who don’t normally file taxes to check if they qualify,” IRS spokesman Eric Smith said in an email.

The agency has an annualawareness day” for the tax credit in January, with activities across the country. Partners including schools, businesses and community organizers have held hundreds of live events over the past few years.

Eligible workers “are missing out on 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 that credit and any others they qualify for. Offering personalized, pre-filled tax returns that residents could accept or change would also help, Ordóñez said.

“For a lot of people whose only source of income is their wages, the Treasury Department knows how much they’re making and whether they qualify for the EITC,” Ordóñez said. “It is our citizen’s duty to file taxes, but it is the government’s duty to make it easy for everyone to file taxes.”

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