For financially-strapped families, refundable tax credits can make the difference between covering rising rent and food prices or falling short. But not everyone who is eligible gets them.
According to 2018 Internal Revenue Service data, the most recent year for state participation rates, 22% of taxpayers eligible for the federal Earned Income Tax Credit didn’t claim it. That ranges a lot by state, from about 17% in the Dakotas and New York at one end to more than 25% in Alaska, Oregon, California, Colorado and Washington state at the other.
The missed funds concern advocates because the credit is one of the country’s biggest antipoverty programs.
“It puts more money into the pockets of low-income workers,” said Juan Carlos Ordóñez, a communications director at Oregon Center for Public Policy. By not claiming it, “it makes their lives harder than it needs to be.”
It’s not too late for some missed credits. You can still claim the Earned Income Tax Credit for the 2019, 2020 and 2021 tax years if you’re eligible, either by filing a tax return or an amended return.
The credit, enacted in 1975, is for low- to moderate-income working households. It cuts the taxes you owe and could increase your refund.
For the current tax year — 2021 — adults who make up to $57,414, have limited investment income and a Social Security number may qualify for credits ranging from roughly $1,500 to $6,700, depending on their filing status and number of dependents.
The 2021 American Rescue Plan expanded Earned Income Tax Credit eligibility to many more childless adults, but only for the current tax year.
Because that provision expired, an estimated 5.9 million childless adults will bear a tax burden that tips them into or deeper into poverty, according to the Center on Budget and Policy Priorities.
Wondering if you qualify for the help? An IRS tax credit calculator clarifies eligibility, and refunds can be tracked through the IRS2Go app. People who requested extensions have until October 17 to prepare and file their income taxes with free tax preparation software using IRS Free File. The elderly, people with disabilities, limited English speakers and those who earn up to $58,000 qualify for free tax preparation services offered through the IRS.
Taxpayers most at risk of losing out on the Earned Income Tax Credit include those living in rural areas, without children, with limited English language skills, people with disabilities and Native Americans, according to the IRS.
In Oregon, about 75,000 eligible families didn’t claim the tax credit in 2018, a combined loss of $84 million, according to an analysis by the Oregon Center for Public Policy.
The vast rural sections of the state and a lack of culturally appropriate information for different populations may account for the low claim rate there, Ordóñez said.
A lack of awareness that the tax credit exists may also be to blame for low participation rates.
“The IRS and partners nationwide regularly urge people to verify if they qualify for the Earned Income Tax Credit, and also urge people who don’t normally file a tax return to review whether they qualify,” IRS spokesman Eric Smith said in an email.
The agency has an annual “awareness day” for the tax credit in January, with activities nationwide. Partners including schools, businesses and community organizers have held hundreds of live events in previous years.
Eligible workers “miss out on thousands of dollars every year if they don’t file and claim it,” Smith said.
The Oregon Center for Public Policy has ideas for how its state could increase participation: Public investment in free tax preparation services to make it easier for people to claim that credit and any other they may qualify for. Offering personalized, pre-filled tax returns that residents could accept or amend would also help, Ordóñez said.
“For a lot of folks whose only sources of income are their wages, the Department of Revenue knows how much they make and if they qualify for the EITC,” Ordóñez said. “It’s our civic duty to file taxes, but it’s the duty of the government to make it easy for everybody to file.”