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: Web:

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 dont owe taxes, they may be eligible Some families can claim both credits

3 Tax Credits: Reduce Poverty The 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 may have 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

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: $110,000Married $75,000Single or Head of Household $55,000Married 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. EICCTC 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 Doesnt 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 Maxines total refund? A. Less than $1,000 B. $2,000 - $3,000 C. $3,000 - $4,000 D. $5,000 or more 19

20 Maxines 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 its 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: 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 (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: 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!

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34 Use the Brookings Institution EITC Website to Localize Your Efforts 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. Other 35

Q&A 36