Bill Szczitka and his girlfriend didn’t know how they were going to save money for their daughter’s college education.
Times were tough, and his administrative job for a local nonprofit wasn’t paying much.
“How the economy is, every dollar is really important to have,” the 33-year-old Buffalo native said. “From the day that we found out we were going to have a daughter, it was going to be hard to put money away.”
Then he went to a volunteer-run free tax preparation program offered through United Way of Buffalo and Erie County’s CASH Coalition. He learned he qualified for the federal Earned Income Tax Credit.
“That was money we weren’t expecting,” he said. “I had always thought it was for people who were on public assistance. I didn’t realize that the average working adult could qualify for it.”
Suddenly, they had an extra $1,500—all for a college fund for 2-year-old Hannah Rose.
“Seeing that I qualified was fantastic,” said Szczitka, who plans to get this year’s taxes done by CASH. “It’s hard to put money away. It’s not much, but it’s a start, and it gives us something to work towards and be able to provide for my daughter.”
Stories like Szczitka’s are precisely the reason that the Internal Revenue Service, consumer advocates, and other nonprofit groups are aggressively promoting the Earned Income Tax Credit (EITC) this year.
With millions of Americans out of work, working fewer hours, or getting paid less, supporters of the credit want to make sure every person who is eligible claims money they are owed.
Last year, an estimated $30 million in potential EITC refunds was left unclaimed in Erie County, according to CASH.
“The EITC is one of the largest and most effective anti-poverty programs in the government,” David R. Williams, the IRS’ director of electronic tax administration and refundable credits, said on a media call last week. “It can make a significant difference in the lives of lower-income taxpayers, basically because it’s a credit that’s there for people who work but don’t make a lot of money.”
The EITC is a refundable credit for working individuals and families who do not earn high incomes. Like other tax credits, it is applied against taxes first, but can result in a refund.
That allows qualifying taxpayers to keep more of what they earn, so they can save money or spend it locally in their communities. In turn, that not only helps lift recipients, but provides an economic development benefit. It has no effect on certain welfare benefits, and usually won’t affect eligibility for other government programs.
“It can have profound implications not only for the people or family that receive the credit, but for the broader community,” Williams said.
Last year, about 24 million U. S. taxpayers claimed over $49 billion for tax year 2008, lifting 3 million children out of poverty. That total included 1.5 million New Yorkers who got an average refund of just over $2,000.
And IRS officials expect at least those numbers for this year, although it’s too soon to tell. Most taxpayers are only now getting their W-2 forms and other tax documents, with the peak filing period beginning now. “It’ll be a couple of weeks before we have the data,” Williams said.
You must file a return to claim the credit, even if you don’t owe money. The EITC can also be claimed for the prior two years.
Locally, CASH volunteers prepared 8,494 returns last year, with 1,848 filers claiming the EITC. In all, taxpayers got $13.84 million in refunds, including $4.13 million from EITC, averaging $1,341 per filer. CASH is projecting 10,000 returns this year, for 2009 taxes.
“The whole program is absolutely amazing. It opened doors for myself and my family,” said Szczitka.
Eligibility for the 35-year-old tax credit depends on earned income and family size, among other factors, with larger households getting a bigger amount. But single people and workers without children can still qualify for smaller payments, and taxpayers can claim the credit even if they don’t owe any taxes at all — two facts that IRS officials and other supporters say are often forgotten.
Congress and the Obama administration also expanded the program last year as part of the stimulus legislation, creating a new category for families with three or more children and raising the maximum benefit.
To claim the credit, an individual’s earned income and adjusted gross income must each be less than $43,279 for three or more children, $40,295 for two children, $35,463 for one child, or $13,440 with no children. For married couples filing jointly, the thresholds are $5,000 higher. Filers can’t earn more than $3,100 from investments.
For this year, the maximum credit tops out at $3,043 for a couple with one child, $5,028 for a couple with two children, and $5,657 for three or more children. Taxpayers with no children receive a much smaller amount — a maximum of $457. Still, “that’s the largest single paycheck or amount of money that couple will see in a given year,” Williams said.
And IRS officials and other supporters of the credit note that it’s particularly critical now given the number of people who lost jobs in the last year or who went from full-time to part-time work, and might be eligible where they weren’t before.
“It’s especially important this year,” said Katie Lyons, project manager for the Creating Assets, Savings and Hope (CASH) Coalition, a United Way-sponsored umbrella group of local government, private sector and nonprofit organizations that work together to combat poverty and help people gain financial self-sufficiency.
Many who don’t claim the credit don’t have children, or are grandparents raising grandchildren. “There’s a misperception that if you don’t have kids, you’re not eligible,” Williams said. “That’s one population, childless workers, where we have lots of room.”
Others typically are people who don’t even earn enough to file a tax return, farmers, rural residents, and people with disabilities.
Hence the push by the IRS to get the word out, partnering with community groups, local government officials and members of Congress.
In particular, the IRS and its partners are again providing free tax preparation through 12,000 Volunteer Income Tax Assistance (VITA) sites nationwide. The IRS provides equipment and trains the volunteers, who file returns electronically and can also provide assistance with all special tax credits.
The growing service is available to those earning less than $57,000 a year, representing about 100 million taxpayers, or the bottom 70 percent of the income ladder. Locally, such sites include nine offered by CASH, as well as others through the University at Buffalo and other organizations. To find VITA sites near you, call (800) 906-9887.
A similar program, Tax Counseling for the Elderly (TCE), is available for taxpayers 60 and older, including the Tax- Aide counseling program offered by AARP at nearly 7,000 sites nationwide. A special service for military personnel and their families, the Armed Forces Tax Council, is also available.
The IRS also has 400 walk-in offices nationwide, with 167 of them open special hours on “Super Saturdays” — Feb. 6 and 20. IRS employees will provide guidance to taxpayers and even help them fill out and file returns electronically.
Locally, CASH is pushing the envelope with its own marketing, using money from the M&T Bank Charitable Foundation to buy 16 bus shelter ads for January, February and March, as well as preparing brochures for distribution and mailing.
The group is also conducting door-to-door outreach with specialized marketing in seven different neighborhoods. And it’s contracted with the 211 social services system for referrals.
CASH is paying special attention to the 14215 ZIP code, which has the highest rate of unclaimed EITC dollars in Buffalo.
They’re also taking aim at people with disabilities, through partnerships with organizations that serve that population. Last year, CASH served 560 people who were disabled or living with someone who is disabled, and Lyons hopes to increase that by 10 percent.
“We’re just starting to market it a little bit better,” Lyons said. “It’s all really new stuff. We haven’t really done it before.”
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