January brings an opportunity to make, and break resolutions, and think about filing your federal income tax return. Before you stop reading here please let me bring to your attention an opportunity to put more cash in your pocket as you complete your tax return.
It is called an Earned Income Tax Credit (EITC) and for certain wage earners between the ages of twenty five to sixty five, earning less than $43,000 with three children in the family, you could qualify for this credit and increase your refund by hundreds and maybe thousands of dollars.Since 1975, when Congress enacted the EITC, qualifying taxpayers have had the opportunity to have a credit applied to their taxes paid and quite often, receive an additional refund at the beginning of the year. This additional refund goes a long way toward paying bills, and if you can, starts a savings account to pay for life’s emergencies as they occur. One not so subtle advantage of the savings account is you can avoid visiting title pledge loan and deferred presentment companies, who are legitimate but place meager incomes at risk with higher interest rates. According to the FDIC, more than 23% of households in Montgomery County rely on these alternative financial service companies.
Putting more cash in your family’s budget is especially critical as the United States begins to claw its way out of this economic quagmire affecting the world’s economy. Yet we see many low income wage earners leaving money on the table by not claiming the EITC, thereby forgoing this important cash infusion. According to the Brookings Institute, more than eight thousand tax filers in my legislative district (District 67) filed for the EITC in tax year 2008.
It is estimated that an additional two thousand people did not claim the credit either because they did not know about it, or perhaps they did not have to file a return based on a below average wage year. At the average additional refund of $2300, that is $4.6 million dollars unclaimed, in District 67 alone.
Clarksville and Montgomery County have, for years, had a dedicated group of volunteers set up to provide free tax preparation assistance. They are specifically trained to target those eligible for the EITC and other tax advantages. Regardless of circumstance, as you look to file your tax return for 2010, please pay close attention to the EITC column on the 1040 forms. For more information you can visit the Internal Revenue Service website at www.irs.gov/eitc.
With poverty, foreclosure and unemployment rates at unacceptably high levels, the EITC is an easy way to ease the day to day financial pressure. To break the insidious cycle of poverty that erodes the stability of our country, putting cash into the pockets of those who need it most is just one way to build wealth in challenging economic times.