Earned Income Tax Credit Awareness Day
Jennifer and Michael, parents of two children, went to the East Missouri Action Agency (EMAA) outreach office hoping to receive assistance with their electric bill. Little did they know that they were soon to be small business owners.
In their effort to increase financial assets or skills in the communities they serve, EMAA has long supported the Volunteer Income Tax Assistance (VITA) Program through the Internal Revenue Service (IRS). The VITA Program, using IRS certified trained volunteers, offers free basic income tax help to people with $51,000 or less in income and need assistance in preparing their own tax returns. In addition to the tax preparation service, EMAA also inform their clients about various tax credits:
As part of their strategic plan, EMAA aims to qualify 1,300 households and obtain tax credits of $1.1 million for their clients!
With the encouragement of EMAA staff, Jennifer and Michael signed up for the Southeast Missouri (SEMO) Assets Program, through which participants can save up to $2,000 in an Individual Development Account (IDA). Such savings under the Administration for Children and Families’ (ACF) Assets for Independence Program (AFI) in the Office of Community Services, are then matched 2:1 and result in a savings of up to $6,000 for an asset purchase such as a house, small business, or post-secondary education.
Jennifer and Michael chose to start their own business. In addition, they received $1,730 in EITC refunds in February 2011 that was then used along with their saved and matched funds to open “Triple B Welding” in Ironton, Missouri. Now, Jennifer and Michael cannot only pay for their electric bill, but also own a welding shop, with a mobile welding option for those who cannot come into the shop.
As one of the largest federal anti-poverty programs, EITC is a powerful asset-building tool for people with earned income because it can reduce their taxes and result in a refund. It is estimated that EITC lifted 6.6 million people out of poverty, including 3.3 million children. Last year, close to 26.5 million people received almost $60.7 billion in EITC. However, approximately one out of five eligible workers do not claim their EITC. For the 2012 federal tax returns, those who are eligible can receive up to $5,981.
Federal refundable tax credits, such as EITC and Child Tax Credit, are important sources of support for low- and moderate- income families. Especially when combined with asset building programs, such as AFI, which funds the SEMO Assets Program, families can reach new heights on their way to the middle class.
Over the past couple of years, ACF has coordinated an outreach strategy that promotes financial education and asset building strategies. And in partnership with the Internal Revenue Service, ACF has engaged in cross- agency efforts to inform low- to moderate- income individuals and families about the various financial empowerment resources available through ACF and the IRS.
So, with Jennifer and Michael in mind-- along with future small business owners, home owners and college graduates who find their way to an IDA program and free tax preparation sites-- ACF commemorates the 2013 EITC Awareness Day on Friday, January 25, 2013.
Jeannie Chaffin serves as the Director of the Office of Community Services, within the Administration for Children and Families (ACF), at the U.S. Department of Health and Human Services.