TAX BENEFIT INFORMATION SHEET - 2007 TAX YEAR
The following provides up-to-date information and resources to assist Region V Administration for Children and Families (ACF) grantees and partners in initiating or enhancing existing efforts to ensure available Federal and State tax benefits are accessible to low-income working families. To obtain additional information on many of the items listed below, please visit the IRS website (www.irs.gov) or contact your local IRS office at the IRS toll free number (1-800-829-1040) or your State revenue/taxation/treasury department.
- Enacted by Congress in 1975, the Federal Earned Income Tax Credit (EITC) is a refundable tax credit that increases the income of low and moderate-income working families by providing tax reductions and cash supplements. As a Federally-funded anti-poverty initiative, the primary purpose of the EITC is to help employed low-wage earners achieve financial self-sufficiency by offsetting taxes, supplementing wages, and making work more attractive than welfare. A wage earner may qualify for a refund based on the credit even if he/she does not owe any tax or did not have a qualifying child. The maximum amount of income a worker can earn and still receive the EITC has increased for 2007. Families with one child who earned less than $33,241 (or less than $35,241 if married and filing jointly) in 2007 maybe able to take a credit of up to $2,853. A family may be able to take a credit of up to $4,716 if it has more than one qualifying child and earned income of less than $37,783 (or less than $39,783 if married and filing jointly). Workers 25 to 64 years of age without a qualifying child who earned less than $12,590 in 2007 (or less than $14,590 if married and filing jointly) may be eligible for a credit of up to $428. The ETTC has been instrumental in closing the poverty gap for many of the nation’s working poor. Despite the success of the program, research reveals that perhaps 15% - 20% of tax filers eligible for the credit fail to claim it. Refer to the IRS website for specific details on the EITC.
- The Federal Child Tax Credit (CTC) is a credit for taxpayers raising a qualifying child(ren). It may reduce a family’s tax for 2007 by as much as $1000 for each of its qualifying children under age 17. The CIC can be claimed on the taxpayer’s 2007 Federal tax return, and claiming it does not reduce benefits that may be available to the family under the EITC. Even if the family has no taxes to pay, it may qualify for the Additional Child Tax Credit, which is a special, refundable credit for certain low-income tax filers who qualify for less than the full amount of the CTC. The Additional Child Tax Credit earnings threshold for 2007 is $11,750. Refer to the IRS website for specific details on the CTC and Additional CTC.
- Workers with at least one qualifying child can get a Portion of the basic EITC added to each paycheck they receive during the year. This can be done by completing Form W-5, the Earned Income Credit Advance Payment Certificate, and submitting it to one’s employer. For many working parents, receiving this additional amount of money in their paycheck can make a difference in paying the rent, buying groceries and meeting other day-to-day needs.
- Workers who have never filed or have not filed their returns in past years may file for up to the past three years. If applicable to their situation, they would still be eligible to receive EITC and CTC benefits for those previous years.
- A family may be able to claim the Child and Dependent Care Credit (CDCC) if the wage earner pays someone to care for a qualifying child dependent that is under age 13 or a spouse or dependent that is not able to care for himself or herself and who lived with the family for more than half of the year. The credit can be up to 35% of allowable care expenses. To claim the CDCC, the tax filer must have earned income during the year. In addition, the child care expenses must be work related, in that they are paid to permit the wage earner to work or look for work. Families earning too little to pay Federal income tax cannot use the CDCC.
- Five Region V States also allow qualified low-income citizens to claim a State Earned Income Tax Credit (EITC): Illinois, Indiana, Michigan, Minnesota and Wisconsin have their own State EITC. Minnesota also provides qualified families a State Child and Dependent Care Credit. Ohio allows qualified citizens to claim a State Child and Dependent Care Credit.
- The 2008 “Money Talks! Have You Heard! Community Outreach Kit” is now available to order from the Center on Budget and Policy Priorities (CBPP). It is a valuable tool for organizations wishing to inform communities about the Earned Income Tax Credit, Child Tax Credit, opportunities for free low-income tax preparation assistance and linkages to asset development opportunities. In addition to updated EITC and Child Tax Credit outreach materials, the kit includes easy-to-read fact sheets on both credits; a full range of outreach strategy ideas that have been used successfully in local communities; posters, flyers, and envelope stuffers in English and Spanish; and information on the essential forms workers need to claim the credits. Flyers promoting the EITC are also available in 19 languages. Organizations may order a free copy of this kit by email at eickit@cbpp.org or by calling CBPP outreach staff at 202-408-1080. Additional kits and color posters can be ordered at a nominal charge.
- The not-for-profit Center for Economic Progress (CEP) provides services promoting access to the EITC and CTC. Annually, the CEP hosts a national training workshop on developing EITC partnerships and initiatives. The CEP is also instrumental in the development of training resources on the EITC and CTC for community agencies. The Center’s website is located at: http://www.centerforprogress.org.
- The IRS sponsors a free Volunteer Income Tax Assistance (VITA) program to help low-income workers fill out their tax forms. This is a valuable service, which allows low-income workers to save the cost of having their returns completed by a commercial tax preparer. Trained community volunteers can help with special credits, such as the EITC, CTC and others. Under the VITA program, groups with links to immigrant populations assist people who are non-English speaking or speak English as a second language. The VITA program can also offer financial literacy workshops designed to support asset-building techniques, such as bank accounts. For individuals who currently do not have basic financial management strategies, the program can explain the disadvantages of not using mainstream financial institutions and address barriers to this population’s employing common financial management practices. The VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping centers and other convenient locations. To locate the nearest VITA site, call the IRS toll free number (1-800-829-1040).
- Free IRS EITC information, promotional materials and other resources are available through the IRS website (www.irs.gov). The site contains specialized training packages, supplemental training materials on recent tax law changes and technical updates, IRS publications in English and Spanish, brochures and stuffers, individual flier notices, and tax forms. Instructional materials are specialized for specific populations, such as children, students, foreign students, and older populations; and include tips, best practices and directions on how to access a variety of other resources. In addition, separate resource packages are geared to individuals, tax preparers, employers, and IRS partners.
- On January 31, 2008. the IRS sponsored a 2008 EITC Awareness Day to generate extensive national and local media coverage on the EITC and free tax assistance.
- Any refund received as a result of taking the EITC will not be used to determine an individual’s eligibility for or benefit amount for Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), Food Stamps and low-income housing. But, if the refund received because of the EITC is not spent within a certain period of time, it may count as an asset (or resource) and affect continued eligibility.
- Many legal immigrants who are employed can get the EITC as long as they meet eligibility requirements. Details on the eligibility requirements are available in the IRS literature and in the CBPP’s EITC campaign kit.
- It is well worth the effort to attempt to involve the business community in EITC outreach. The EITC can supplement an employee’s wages and promote a stable workforce. The EITC refunds help customers pay bills and bring Federal dollars into local economies. In addition, publicizing the EITC can increase a business’ visibility in the community. Job training program sites and early childhood programs are also logical targets for EITC outreach. The CBPP’s campaign kit provides many helpful ideas for involving businesses, job training providers, and early childhood programs in EITC outreach efforts.
- Staff members of partner agencies, or members of their families, may also be eligible for EITC and other tax credits. They should be included in efforts to promote these benefits.
- Consider promoting the use of Individual Development Accounts (IDAs), special “matched savings accounts” designed to reward low-income working families that save by providing funds to match their monthly deposits. Details on this important asset-building program can be found at the ACF website, www.acf.hhs.gov/assetbuilding/.008