By Karen M. Erlenbusch
April 8, 2010
A woman I'll call Donna recently came to us about the United Way of Olmsted County's Refurbished Computer Program. It's a program where low-income families can for a nominal fee obtain a refurbished computer for use in helping with homework, and bridging the digital divide.
United Way of Olmsted County is connecting people with free tax preparation and promoting the Earned Income Tax Credit. Last year, 855 tax filers in Olmsted County received a total $1,188,321 through our partnerships.
The IRS estimates one in four eligible taxpayers will overlook the Earned Income Tax Credit -- or EITC -- worth up to $5,600 or more this year! That is so much more than finding the $20 bill you left in last year's spring jacket! What would you do with up to $5,600?
For many residents like Donna, EITC can be a financial boost. Families use the EITC to pay for things like home repairs, vehicle maintenance or to obtain additional education or training to boost their employability and earning power. One in four eligible taxpayers could miss out because they don't check it out.
EITC is a refundable tax credit, meaning you can get money back even if you owe no federal income tax or had no tax withheld. And, if you owe tax, it can offset the amount you must pay.
The credit is designed to encourage and reward work. Beginning with the first dollar, a worker's EITC grows with each additional dollar of wages until it reaches the maximum value. This creates an incentive for people to leave welfare for work and for working poor people to work additional hours toward full-time employment.
In 2009, the EITC lifted an estimated 6.6 million people out of poverty, including 3.3 million children. The poverty rate among children would have been nearly one-third higher without the EITC. The EITC lifts more children out of poverty than any other single program or category of programs.
One way the EITC reduces poverty is by supplementing the earnings of minimum-wage workers. There is broad bipartisan agreement that a two-parent family with two children with a full-time, minimum-wage worker should not have to raise its children in poverty. At the minimum wage's current level, such a family can move out of poverty only if it receives the EITC as well as food stamps.
Unlike other tax credits, EITC is based on a combination of factors such as the source and amount of your income, or combined income if married, whether you have qualifying children and how many. Although children are not required for eligibility, they increase the amount of your credit.
It's even more valuable in Minnesota with our corresponding state tax credit.
The economic impact of the credit reaches beyond the initial dollars. For many low-wage workers, the tax refund -- including the EITC -- constitutes the largest payment they receive all year long. Local spending of this kind creates important ripple effects throughout our entire local community as dollars move among consumers, firms, and their employees.
If you are eligible for EITC, you must file a federal income tax return, even if you are not otherwise required to file, and you must specifically claim the credit to get it. Rural and non-traditional families -- such as grandparents raising grandchildren -- childless workers, and Spanish-speaking taxpayers are among those who most frequently overlook this credit.
No-cost help is available in many communities. Volunteer income tax assistance sites or IRS Taxpayer Assistance Centers will compute your EITC and prepare your return at no charge. If you need assistance locating a volunteer site, call 2-1-1 (or 800-543-7709) for local services or call the IRS at 1-800-906-9887.
According to the latest IRS data, 60 percent of Olmsted County tax filers who qualify for free tax preparation and the Earned Income Tax Credit use a paid preparer; that is over 4,000 tax filers. United Way of Olmsted County has partnered with AARP Tax-Aide Program to provide free tax preparation at four sites in Olmsted County.
There are just a few days left until the tax filing deadline for 2009. Call 2-1-1 to get your free tax appointment set up and find out getting about your Earned Income Tax Credit!