Maximizing the Earned Income Tax Credit: Information and Outreach

2. Catholic Charities USA Webinar: The Earned Income Tax Credit Information and Outreach

3. Presenters • Monica Maggiano, Director, Campaign to Reduce Poverty in America • Jane Stenson, Senior Director for Human Services • John Wancheck, EIC Campaign CoordinatorCenter on Budget and Policy Priorities • Amelia Dalton, Senior Tax Analyst, Internal Revenue Service • Claudie Burchfield, Director of the Office of Economic Opportunity in Murphy, North Carolina

4. Agenda • What is the Campaign to Reduce Poverty? Monica Maggiano • Introduction of EITC and Speakers Jane Stenson • Money Talks! Have you heard? John Wancheck Claim the Earned Income Credit • Questions and Answers • IRS Amelia Dalton • EITC outreach Claudie Burchfield • Questions and Answers

5. What is the Campaign? Goals • Cut poverty in the United States by 50 percent by year 2020 • Call upon the government to better serve the poor and improve public policies that strengthen and support families • Educate policymakers and the public about the struggles of those living in poverty • Engage those who are most impacted by government policies to be active participants in developing solutions to reducing poverty • Partner with individuals, government, and organizations to address poverty in our country What can I do? Endorse the Campaign and take action!

6. Main Issue Areas • Health • Hunger • Housing • Family Economic Security Catholic Charities USA supports tax policies that strengthen low-income families and individuals and address the needs of the poor and the vulnerable. This includes expanding the Earned Income Tax Credit (EITC), which is widely credited with lifting millions of families and individuals out of poverty every year.

7. Money Talks! Have you heard? Claim the Earned Income Credit John Wancheck

8. Money Talks! Have you heard?Claim the Earned Income Credit Presentation by: John Wancheck Organization: Center on Budget and Policy Priorities Outreach Kit!www.cbpp.org/eic2008 Phone: (202) 408-1080 Email:wancheck@cbpp.org

9. The Earned Income Credit (EIC)… • Represents up to a 40% pay increase for some workers • Can turn an $8 per hour job into a $10 per hour job • In 2005, raised 4.1 million individuals — including 2.2 million children — above the poverty line

10. Helping working families out of poverty, 2007 Estimated 109% Poverty Line for Family of Two (including EITC one child) 89% $2,853 $14,159 Food Stamps Food Stamps $1,812 $1,812 Annual Income Full-time Minimum Full-time Minimum Wage Job* (less Wage Job* (less withholding) withholding) $10,805 $10,805 Without EIC With EIC The EIC: Making a Difference

11. How Do Workers Benefit? • Single parent, 2 children, earns $14,000 Her EIC = $4,716 • Single parent, 2 children, earns $18,000 Her EIC = $4,166 • Married workers, 2 children, earn $25,000 Their EIC = $3,113

12. No children One child Two or more children The Federal Earned Income Credit in Tax Year 2007 $5,000 Maximum benefit $4,716 $4,000 Maximum benefit $2,853 $3,000 Credit Amount $2,000 Maximum benefit $428 $1,000 $0 $40,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 Note: Married couples with income in the phaseout range qualify for a higher credit than single parents — shown by dashed lines.

13. EIC Benefits for Tax Year 2007 at Various Income Levels Note:This is not a tax table. Do not use this table to complete income tax returns.

14. How Much Can Workers Earn and Qualify for the EIC? For tax year 2007: • The average refund amount for families is $2,280. • Income limits for married workers who file their taxes jointly are $2,000 higher than these amounts. • Investment income cannot exceed $2,900.

15. Definition of a “Qualifying Child”

16. Why is outreach needed? • As many as 15-20% of eligible workers don't claim the EIC • 70% of workers who claim the EIC pay commercial fees to file returns — can amount to over $300 or more in fees, draining about $1.4 billion out of EIC refunds nationwide • Includes the “unbanked”

17. Who’s Missing Out? • Workers at risk of missing out on the EIC include: • Parents just entering the labor force; self-employed • New parents — incl. foster and adoptive, kinship care • Divorced or separated parents • Homeless workers; dislocated workers • Workers not raising qualifying children • Parents with older disabled children • Workers who speak English as a second language • Workers not otherwise required to file a tax return • For Tax Year 2007: $8,750 - single $11,250 – head of household $17,500 - married

18. Volunteer Income Tax Assistance (VITA) • Provides free tax filing help for low-income workers at community sites. • Sponsored by the IRS • In many communities across the country • Refunds deposited in 7-12 days through e-filing • Sites can help open bank accounts • Alternative to costly commercial tax preparation fees and Refund Anticipation Loans (RALs)

19. EIC Outreach Coalitions • Choose strategy, themes and materials for tax season outreach campaigns • Find partners to host Volunteer Income Tax Assistance (VITA) sites • Recruit VITA volunteers as preparers • Organize training for volunteers • Get information out to workers!

20. The Value of More Partners • Outreach coalitions divide campaign tasks; takes advantage of partners’ special capabilities and avoids duplication • Some partners are experienced reaching some parts of the community: Ex. -- ethnic communities and businesses, family day care providers, people with disabilities

21. Making Connections • Finding an Outreach Coalition www.cbpp.org/eitc-partnership/directory.htm • Coalitions will have lists of VITA sites, flyers, etc. • Finding VITA sites for referral • Individuals: Call IRS 1-800-829-1040 (voice-mail option #1, then #5, gets you to an operator who has sites by zipcode). • Groups: call the IRS Territory Manager for a list www.cbpp.org/eic2007/territorymanager2007.pdf

22. EIC Impact in the Community Caddo Parish, LA • 32% of all tax filers claimed EIC for 2004, bringing in nearly $74 million, plus over $17 million through the Child Tax Credit • If 20% of those eligible didn’t claim the EIC, nearly $10 million from the EIC may have been left in Washington instead of benefiting Caddo Parish. Tax Preparation Fees and Loans • 78% of Caddo Parish EIC filers used commercial preparers – higher than national rate. • About half of EIC filers also used expensive RALs.

23. Local EIC Claims Data • Brookings Institution interactive website www.brookings.edu/metro/EITC/EITC-Homepage.aspx • Zip Code-level data • Statistics on EITC, CTC, RALs, income levels of filers…..& much more…..

24. Do the EIC/CTC Affect Other Public Benefits? • EIC: not income for specified federal programs including: • Food stamps Medicaid • SSI Veteran’s benefits • Public housing Head Start States generally don’t count EIC for TANF or SCHIP. Some count it for child care and energy assistance. • CTC: Not income for any federal, state or local program financed even in part with federal funds

25. Programs have different rules about how long the EIC or CTC refund can be saved before it counts against program resource limits. All programs exclude EIC/CTC as a resource for at least one month after the month the refund is received. Food stamps – not counted for 12 months SSI — not counted for 9 months IDAs are a “safe harbor.” Resource rules

26. Advance EIC: Get the Most out of Every Paycheck • Some workers raising children can get the Advance EIC in their paycheck and get a year-end refund too! • Increase take-home pay up to $130 p/month. • Workers must file IRS Form W-5 with their employer to start Advance EIC payments.

27. Additional Tax Credits Child Tax Credit (CTC) • The CTC is worth up to $1,000 for each qualifying child under age 17 • Workers who earned more than $11,750 in 2007 can get a CTC refund Child and Dependent Care Credit (DCTC) • Federal tax credit for expenses to care for a young child, or a dependent with disabilities, in order to work. Credit only reduces income tax. • Maximum expenses: • $3,000 for one dependent, $6,000 for two or more

28. How Do Workers Benefit? • Single parent, 2 children, earns $14,000 Her EIC $4,716 + CTC $338 = 5,054 • Single parent, 2 children, earns $18,000 Her EIC = $4,166 + CTC $938 = 5,104 • Married workers, 2 children, earn $25,000 Their EIC = $3,113 + CTC $2,000 = $5,113

29. IRS- EITC Amelia Dalton Senior Tax Analyst, Internal Revenue Service

30. Spotlight on an Agency Link between Financial Literacy and EITC Claudie Burchfield Director of the Office of Economic Opportunity in Murphy, North Carolina

31. Questions and Answers Amelia.Dalton@irs.gov 1-404-338-8945

32. Thank you for participating! Please complete the survey at the end of the webinar!