The Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a tax benefit for working people who earn low or moderate incomes. Its purpose is to reduce the tax burden of low-income workers, to supplement wages, and provide a work incentive. Qualifying workers who file a federal tax return are eligible to get back some or all of the federal income tax that was taken out of their pay during the tax year. There are also benefits for low-income workers who did not have taxes taken out of their paychecks.
The EITC was instituted to help reduce child poverty, reward families moving from welfare to work, and increase the disposable income of families struggling to make ends meet. Money received from the credit does not count as income in determining eligibility for food stamps, Supplemental Security Income, Medicaid, cash assistance, or public housing. Many immigrants are also eligible for the EITC, including green card holders, refugees and others who are legally authorized to work. EITC is the largest federal anti-poverty program—annually lifting 2.6 million children out of poverty. The credit increases low-income families’ disposable income, and is designed to increase the potential for saving, the purchase of a home or car, or for costs associated with tuition and job training.
Despite the benefits of EITC, every year millions of EITC dollars go unclaimed. To raise EITC awareness and provide free tax preparation services for families who may be unable to file themselves or pay for professional tax preparation services, the IRS introduced the concept of partnering with external stakeholders to promote the EITC through Community Based Partnerships (CBP). A CBP is a coalition of local community organizations (e.g. nonprofits, faith-based organizations, state/local governments, financial institutions, etc.) that have a common interest or shared commitment. This partnership strategy brings together free tax preparation assistance through the Volunteer Income Tax Assistance (VITA) program, EITC awareness and education through the marketing efforts of the community organizations, and asset-building initiatives through partnering foundations, financial institutions, and other philanthropic entities.
The United Way of Central New York, working together with community partners, established five new Volunteer Income Tax Assistance sites in Syracuse to increase local EITC benefit. The mission of the EITC: You've Earned It! initiative is to help low-income workers and their families increase their financial stability by providing free tax preparation assistance, e-filing and referrals. It is a collaborative initiative in Onondaga County to both increase the number of EITC refunds to low-income families, and to reduce the number of families who access these refunds through predatory lending companies—many fee-for-service tax preparation centers entice EITC recipients with immediate cash in the form of a loan against their IRS refund. Referred to as a Refund Anticipation Loan (RAL), consumers borrow against part or all of their expected tax refunds. RALs are heavily marketed by commercial tax preparers to low-income consumers who can least afford triple-digit interest rates for fast cash. A typical RAL includes a loan fee, tax preparation fee, and electronic filing fee, ranging from $125-$450. Despite the associated fees, RALs are appealing because they put money into cash-strapped tax filers’ hands within one to two days. RALs also pose an additional risk to filers—if after the tax return is filed and the government denies any tax credits or deductions, the tax filer must repay the RAL, on top of the initial fees. In such instances, the tax payer ends up losing money because s/he doesn’t receive the tax benefit, but has already paid the fees.
Locally, EITC refunds total over $30 million annually in the eight lowest-income zip codes of Syracuse. The EITC: You’ve Earned It! initiative is anticipated to bring in an additional $10 million of EITC refunds. This initiative benefits both individual EITC recipients and the community at large—EITC provides income and employment incentive to low income households, and will likely be spent, retained, and re-circulated within low-income communities.
EITC: You’ve Earned It! Goals
- Increase the number of community volunteers participating as tax preparers at EITC sites.
- Develop community awareness and utilization of EITC, increasing economic assets available to working families.
- Increase the number of low-income families who have access to low or no-cost bank accounts.
- Connect low-income workers to additional community services, enhancing food stamp enrollment.
- Reduce dependency on institutions that may be practicing predatory lending.
- Boost financial stability among low-income workers.
Community Geography and the EITC
Early in the planning stages of this new initiative, the SU Geography Department was asked by the United Way of Central New York and its partners to help identify geographically suitable areas for new Volunteer Income Tax Assistance sites for the EITC: You’ve Earned It! Initiative.
Maps were created to demonstrate:
- Areas where people who would benefit from the EITC and free tax preparation services resided. The target population for the initiative included low-income families, elderly adults, persons with disabilities, and non-English speaking families.
- The locations of community centers, faith-based organizations, non-profit agencies, and schools that might be able to provide in-kind access to facilities and equipment for volunteer tax preparation. Potential sites needed to possess computers, internet access, and space to accommodate volunteer tax preparers and clients.
- The public transportation network and public transportation accessibility for proposed sites.
To see the maps that were created to help inform the selection of EITC You’ve Earned It! tax preparation sites, click below:
Median household income by block group in Syracuse
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Percent of Households Living Below the Federal Poverty Level
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Potential Locations for new VITA Sites
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To see the locations of 2006 EITC: You've Earned It! volunteer income tax assistance sites, sponsored by the United Way, click below:
Proximity of United Way Sponsored VITA Sites to Other VITA Sites in Syracuse
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2006 United Way Sponsored Volunteer Income Tax Assistance Preparation Sites
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2006 United Way Sponsored Volunteer Tax Preparation Sites and Percent of Families Living Below the Federal Poverty Level
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Proximity of United Way Volunteer Income Tax Assistance Sites to Centro Bus Lines
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EITC Community Partners
Central New York Community Foundation
Child Care Solutions
Franciscan Outreach Center
Rosamond Gifford Foundation
Hospice & Palliative Care Associates
Huntington Family Centers, Inc.
InterReligious Council of CNY
InterReligious Food Consortium
Partners Trust Bank
Salvation Army,Syracuse Area
The Samaritan Center, Inc.
Southside Interfaith Housing Corp.
Sydney Johnson Vocational Center
Greater Syracuse Chamber of Commerce
Syracuse City School District
Syracuse Jewish Family Services, Inc.
United Way of Central New York
Various Individual Partners