Earned Income Tax Credit
The federal Earned Income Tax Credit (EITC) is credited with bringing more children out of poverty each year than any other federal program. The EITC not only reduces the tax burden on low-income workers, but it also supplements wages, and assists people in making the crucial transition from welfare to work. Created by Congress in 1975, the federal Earned Income Tax Credit, or EITC, provides a lump-sum cash refund to low-wage working individuals and families.
The EITC is the largest federal income subsidy program targeting the working poor. Through the EITC, in 2003, the IRS administered over $36 billion in tax refunds to low-wage workers. These refunds are re-invested into local communities as workers use the funds to make ends meet, invest in home ownership, education, small business, or other important assets that can change their lives. What distinguishes the EITC from other federal income support programs is that eligibility is based on a pre-requisite of employment, making work pay for workers in entry-level positions.
The EITC is a unique example of how the tax system can be used to provide an incentive to the working poor. The use of tax incentives for work and homeownership is nothing new for middle and upper income tax payers who enjoy tax breaks derived from 401K programs, IRAs, mortgages, home equity loans and business deductions to name a few. The EITC has never been as powerful as it is today, as thousands of former welfare recipients are now employed in low-wage jobs and approximately one-third of all workers fall under the umbrella of the working poor. Although the EITC provides major financial benefits to the working poor, the fact remains that as many as 18 - 25% of eligible taxpayers do not claim the credit.
To find out where you can go to get your taxes done for free and see if you qualify for the EITC, please check back soon for our 2010 Free Tax Preparation Locations & Times.
To find out how you can help promote the EITC, see our Volunteer or Materials Request section.