On April 15, or "Tax Day," many U.S. residents are thinking about their finances (the filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers). For families with low and moderate incomes who receive the Earned Income Tax Credit (EITC), tax time presents a unique opportunity. The EITC is typically the largest single payment these workers and their families receive each year. This financial boost can help families pay down debt, make major purchases they otherwise delayed, or build savings for the future. OPRE partnered with MEF Associates and Urban Institute to review existing evidence on the structure and timing of EITC payments and explore how proposed changes could influence families’ financial stability. The 2021 report, The Earned Income Tax Credit: Program Outcomes, Payment Timing, and Next Steps for Research (PDF), found that:
- The EITC provides substantial benefits that extend to many people who are both working and participating in traditional safety net programs such as TANF.
- A lump-sum payment may be most appropriate for people who prefer to use the funds for large purchases or to build savings. However, for those who prefer to use EITC funds to pay down debt or meet basic needs within the year, a recurring payment may be more beneficial.
- Administrative costs for periodic payments are likely to be higher than for lump-sum payments.
- Additional research is needed to analyze who is likely to benefit from periodic payment options and how the proposed change would affect their financial stability.
April is also National Financial Capability Month . Financial capability refers to knowledge, skills, and access to financial services that empower individuals and families to manage their financial resources effectively. Navigating the financial landscape can be challenging, especially when people lack information or experience with financial tools and services. But existing evidence links financial capability interventions — including financial counseling and financial coaching — to better economic outcomes by helping people build financial skills, gain experience with financial services, and promote positive financial behaviors.
Integrating financial capability services into education and training programs is one approach to expanding access to financial capability programming. But there is limited evidence showing the effectiveness of integrated models. OPRE contracted with MEF Associates and Urban Institute to conduct a research project on Integrating Financial Capability and Employment Services that will begin to fill this gap. The project is currently fielding a survey of employment and training programs to better understand how financial capability programming is delivered in the context of these programs. We invite education and training programs that offer financial capability services to participate in the survey by sending an email to IntegratedFinCap@mefassociates.com. Survey responses are welcome through May 15, 2022. Overall, this study aims to build evidence to inform financial capability policies and practices and help establish a basis for future research. Visit the project website or the study registration to learn more.
Mina Addo is a National Poverty Fellow in OPRE. Her work focuses on education and training programs and financial capability interventions. She has a particular interest in precarious work and the intersection between economic insecurity and well-being.
Lisa Zingman is a Social Science Research Analyst in OPRE’s Division of Economic Independence. Her work focuses on building the research evidence for programs aimed at improving the lives of low-income children, individuals, and families.