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Helping Low-Income Taxpayers Get Their Due

By Marian Wright Edelman

    Great news: Within the thousands of pages of tax law lies a provision called the Earned Income Tax Credit (EITC) that enables many working poor families to climb out of poverty.  The bad news is that many low-income taxpayers are unaware of the EITC and don't know how to take advantage of it.
     Nevertheless, the most recent estimates show that the Earned Income Tax Credit lifts more children out of poverty than any other anti-poverty program—2.4 million children in 2005.  Without this crucial infusion of cash, it is estimated that the child poverty rate that year would have been nearly one-fourth higher.
      However, $3 billion dollars in EITC benefits intended for working families were diverted in tax year 2005 to commercial tax preparers and lending institutions that often charge excessively high fees for tax preparation.  They also entice many low-income taxpayers to take out Refund Anticipation Loans (RALs), which causes an even greater loss of money among them.
      According to Internal Revenue Service (IRS) figures, more than 22 million taxpayers received the EITC for the 2005 tax year, with an average benefit amount of $1,894.  The total EITC revenue paid out represented a $41.8 billion gain for those individuals, children and families and the communities in which they live and work. 

   These tax refunds due to low-income taxpayers also spur local economies, with surveys showing that most EITC recipients use their

Posted March 26, 2008

  refunds to meet short- to medium-term needs such as catching up on rent and utility bills, purchasing clothes for their children or repairing their car.
      For a number of years, the Children's Defense Fund (CDF) has helped low- and moderate-income tax filers gain access to tax credits for which they are eligible—including the EITC and the Child Tax Credit—by raising awareness and providing free tax preparation assistance through the IRS Volunteer Income Tax Assistance (VITA) program.  The IRS partners with organizations to certify and train volunteers to help prepare tax returns. VITA sites, often sponsored by community organizations, are located at neighborhood centers, libraries, schools, shopping malls and other convenient locations.
      CDF was able to help families recoup more than $65 million in tax refunds during the 2004 tax season, more than $105 million during the 2005 tax season, and over $169 million during the 2006 tax season. These dollars mean a lot to struggling families.
For more information about CDF's tax and benefits outreach program, go to www.childrensdefense.org/taxes.

    Marian Wright Edelman is President of the Children's Defense Fund and its Action Council.

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