Tax opportunities during taxing times

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Indian Country Today

By: Tracey Fischer

January 21, 2010

 

The Internal Revenue Service has designated Jan. 29 as Earned Income Tax Credit Awareness Day.

At Oweesta we work with Native communities to help them build financial assets, and we are partnering with the IRS to promote awareness of the EITC throughout Indian country.

 

The EITC program is the largest federal anti-poverty program in the United States - larger than food stamps and Temporary Assistance for Needy Families combined. It has the potential to bring hundreds of millions of dollars to Native communities annually. Unfortunately, a large portion goes unclaimed or is skimmed off by high-cost fees from paid tax preparers.

 

What is an "EITC?" An EITC is a refundable federal income tax credit for low- to moderate-income working individuals and families. A "refundable tax credit" means that an individual will receive the entire credit that he or she is eligible to receive, even if it means the credit is more than federal income tax owed. So for example, if your federal income tax liability is $500 and you are eligible for a tax credit of $1,500, you will be able to receive the excess $1,000 tax credit in the form of a refund from the IRS. Now that's a good deal.

 

The amount you may receive in your EITC refund will vary depending on your income and number of children. The maximum credit this year is $5,657 for a family with three or more qualifying children. If you have two qualifying children, your maximum credit is $5,028. If you have one qualifying child, your maximum credit is $3,043. If you don't have any qualifying children, you can still receive up to $457.

 

This year the American Recovery and Reinvestment Act has provided a temporary increase in the EITC and expanded the credit for workers with three or more qualifying children. These changes will apply to the 2009 and 2010 tax years.

 

Who is eligible to claim the EITC? If your total household income was less than $48,279 last year, you may be eligible for the EITC. To qualify you must file a tax return, even if you did not earn enough money to be obligated to file a tax return.

 

The EITC generally has no affect on other forms of public assistance that a person may receive. People who were eligible for an EITC refund within the past three years, but did not claim it, can still file to receive their EITC refund.

 

How do you claim the EITC? The best way to claim your EITC is to seek out a qualified tax preparer to help you prepare your return. If you want to receive your full federal tax refund without spending additional money to have someone file your tax return for you, you should take advantage of a free tax preparation site in your area. The IRS's Volunteer Income Tax Assistance Program offers free tax help to low- and moderate-income people across the nation. IRS-certified volunteers staff the VITA sites, and most sites also offer electronic filing. To find the VITA site nearest you call (800) 829-1040, or contact your local or tribal government office.

 

For the first time ever, on Jan. 4, the IRS announced its intent to license the nation's sizable and growing tax preparation business. This is a great achievement, because currently anyone can charge a fee and complete tax returns. When our hairdressers and food vendors are required to be licensed, why are the people who hold our most vital and confidential financial information left unregulated? Beginning in 2011 paid tax preparers will be required to register, pass a competency test, and complete 15 hours of continuing education each year.

 

We have seen the positive impact of EITC refunds and, because of the current economic downturn, it is more important now than ever for Native people to be aware of credits they are qualified to receive on their federal income tax returns. EITC refunds can help individuals in Native communities jumpstart their financial savings goals, pay off debt, or even just make ends meet. When tax refunds can assist in paying off debt or be used as seed money to start a small business, our Native families cannot afford to let EITC money slip away. Let's bring unclaimed EITC dollars to our Native communities.

 

Tracey Fischer, a licensed attorney and member of the Cheyenne River Sioux Tribe, is the president and chief executive officer of First Nations Oweesta Corporation based in Rapid City, S.D. Oweesta assists with the establishment of community development financial institutions and financial education and asset building programs in Native communities throughout the United States. Additionally, Oweesta works with Native communities to strengthen entrepreneurship environments. Tracey obtained her law degree from Yale Law School. She also has a B.S. in business administration and accounting.

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This page contains a single entry by Ernest Roberts published on January 21, 2010 3:44 PM.

Consumers score a win on credit card rules was the previous entry in this blog.

Interview with Richard Thaler is the next entry in this blog.

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