This Tax Season, One Out of Five Could Miss Out on Big Credit
This article originally appeared as an Op-Ed in the February 28th edition of the Charlotte Observer.
It’s time to file our income taxes, and for many that means missed opportunities to get larger refunds without paying exorbitant service fees. It doesn’t have to be that way, particularly because there are options for low- and middle-income families to receive free tax assistance.
One reason filing income tax returns is so important is because it’s the only way to claim the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). The EITC is a refundable tax credit to help workers make ends meet when they are earning less than about $60,000. These credits encourage work by helping to offset payroll and sales taxes paid by all workers that hit low- and moderate-income families particularly hard.
Originally established under the Ford Administration and expanded by presidents Reagan, Clinton and Bush, the EITC is one of the nation’s largest and most effective anti-poverty programs. President Reagan called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”
In 2010, the EITC and CTC lifted more than 9 million people out of poverty, half of them children. But the IRS estimates one out of five eligible households does not claim their EITC, which can be up to $5,891 this year.
Some people don’t know how to claim it. Others are talked into “refund anticipation loans” by firms that aggressively advertise “get your tax refund now” or tout “free” tax preparation. Often, however, the loan comes at a high interest rate risking a 145 percent service charge, according to the Center for Responsible Lending.
But there are safe, reliable alternatives. The Benefit Bank of North Carolina (TBB-NC) and Volunteer Income Tax Assistance (VITA) sites offer free tax filing options for low- and moderate-income families. These options save tax preparation fees and avoid “refund anticipation loans” that can cost families big money.
In 2012, North Carolinians filed 3,325 federal tax returns and 2,104 state returns using TBB-NC. It offers two options: counselor assistance at TBB-NC sites, or online using a self-serve portal. TBB-NC sites with trained counselors include nonprofits, churches, and other locations across the state. Just like the counselor assisted version, TBB-NC’s free, self-serve version offers online filing as well as assistance filling out forms for student financial aid, veterans’ benefits and other work and income supports.
The VITA program offers the services of IRS-trained tax preparers to help households with incomes less than $51,000.
You don’t have to explain the benefits of The Benefit Bank to a client named Sue, of Charlotte. Last year, TBB-NC helped her recover nearly $20,000 in unclaimed refunds going back three years. After being referred to TBB-NC by Legal Aid, Sue was determined to make sure her daughter could attend college by completing her taxes. With the assistance of a trained TBB-NC counselor, Sue completed her taxes, her daughter’s Free Application for Federal Student Aid (FAFSA), and learned she was eligible for a whopping refund.
As America works toward recovery, let’s help each other avoid getting ripped off. To find a local TBB site or complete your taxes self-serve, visit www.tbb-nc.org, or visit www.eitc-carolinas.orgfor a VITA site near you.