The Detroit News
By Brian J. O'Connor
February 16, 2010
Michiganians struggling to just get by in this dismal economy are getting a helping hand from an unlikely source: the tax man.
Federal and state tax agencies have anywhere from a few hundred to several thousand dollars to give low-income workers and their families through the Earned Income Tax Credit.
Last year, more than 720,000 Michigan residents collected $1.5 billion from the federal credit, at an average of $2,047 apiece. More than 40 percent of those getting the credit lived in Wayne, Oakland or Macomb counties. Michigan gave out $145 million under the first year of its own state credit, which matched 10 percent of the federal cash, and this year the state is set to match 20 percent of the federal amount.
This year, tax experts expect the economy has knocked down more people's incomes low enough that they'll qualify for the credit for the first time.
"Due to the economy, unfortunately, a number of taxpayers may fall into the Earned Income Tax Credit range, where last year they may have been making more than that," said Marshall Hunt, director of tax assistance for the Accounting Aid Society of Detroit, a nonprofit that helps taxpayers claim refunds and credits.
Still, the credit remains unknown to many people who most need it. Tax experts estimate that 25 percent of eligible recipients fail to claim the earned income credit - a statistic that means more than 180,000 Michigan residents missed $375 million in federal refunds last year.
The credit aims to help the working poor, and cuts off at a maximum of about $18,000 a year in income for a single person and $48,000 for a family with three children. Only income from work and some investments counts, not public assistance.
Many people don't file a return because they don't owe taxes, leaving most tax credits useless to them. But the earned income and a few other credits are refundable, meaning that those who file don't just get lower taxes - they get cold, hard cash.
That's the hope for Detroiter Louwander McCray, 48, who was laid off from her state job last year. Last week, the mother of two visited the Accounting Aid Society's Northwest Neighborhood Tax Center, to get help claiming the earned income tax credit after getting it last year.
"It worked out pretty good," said McCray, whose children are ages 13 and 14. Last year, she used the money to catch up on bills and plans to do the same with this year's refund. "It's a help."
And more people who can use that help could be claiming it, noted Ramondo Gee, a territory manager for the Internal Revenue Service's outreach efforts. One mistake people make about the credit is thinking that they don't qualify if they've lost a job, he said. Many of those people may have made too much to claim the credit in the past, but after several months out of a job, their 2009 income may have dropped low enough to qualify.
"The first thing that comes to mind is 'earned income' and they think that because they've been laid off the majority of the year, they don't qualify," Gee said. "But as long as you've got earned income you should try."
One misconception about the credit is that workers must have children to qualify. Although the credit is low for people without children - maxing out at $457 for the federal credit - it's still available to filers without offspring.
The other reason to file for the credit, Gee said, is that people who qualify for the credit also qualify for free tax help from the IRS, the Accounting Aid Society, the IRS online service and other groups that offer tax assistance.
In addition to claiming the credit for 2009, workers who missed in past years can file an amended return to claim the credit, going back three years.
That's what Eddie Hobbs of Detroit was aiming for last week at the tax center as he wrangled tax papers for the last two years.
"I'm hoping they can help me get these taxes under control," said the father of two, who was laid of last spring.
With the refunds, he said, "I can take care of some of these people that've been calling me."