What is the EITC?

The Earned Income Tax Credit, or EITC, is a federal anti-poverty tax credit designed to supplement the earnings of low-income working individuals and families by reducing or eliminating their taxes. According to the Policy Almanac, in 1998 the EITC was claimed by 19.4 million people, lifting 4.8 million people out of poverty, including 2.6 million children.

However, millions of American families who are eligible for-and would benefit from-the EITC do not receive it, leaving billions of additional tax credit dollars unclaimed. Research by the General Accounting Office (GAO) and Internal Revenue Service (IRS) indicates that between 15% and 25% of households who are entitled to the EITC do not claim their credit. That's between 3.5 million and 7 million families.

Congress originally approved the tax credit legislation in 1975, in part to offset the burden of Social Security taxes and to provide an incentive to work. When the EITC equals the income tax an individual owes, it exempts the person from paying income taxes; when the EITC exceeds the amount of income tax owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. The EITC is administered by the Internal Revenue Service.

Many cities around the United States, sometimes in partnership with government and with some public financing, have begun programs designed to increase EITC utilization by raising awareness of the credit and assisting with the filing of the relevant tax forms.

Dollar Wi$e Best Practices: Earned Income Tax Credit

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This publication describes successful EITC programs in several Dollar Wi$e cities, from Savannah to San Francisco.

Links

• EITC information from the Internal Revenue Service (IRS)
  Official information on the EITC from the IRS, including forms and publications.
• Center on Budget and Policy Priorities (CBPP): 2008 Earned Income Credit and Child Tax Credit Outreach Kit
  Online version of an outreach kit produced by CBPP and designed to assist local governments, community-based organizations, and others in organizing and implement a local EITC outreach effort. (Note: Most items on this page are in PDF format and require the free Adobe Reader software .)
• National EITC Outreach Partnership
  A coalition of national organizations, government agencies, nonprofit groups, and others that are working to promote awareness of the EITC, of which the National Dollar Wi$e Campaign is a member. Extensive contact information for EITC outreach efforts and associated organizations across the country.
• State EITC Online Resource Center | StateEITC.com
  Information about state earned income credits in states that already offer them and efforts in other states to enact earned income credits. Offers a "50 State Resource Map" with information on income taxes and EICs for all 50 states and the District of Columbia.
• TaxCreditResources.org
  Information on the federal EITC, state earned income credits, and the Child Tax Credit.
• irs-eitc.info
  Detailed information from the IRS on the EITC. Includes some information about earned income credits offered by 18 states and the District of Columbia, as well as news releases, state-by-state statistics, and media contacts.
• irs-eitc.info/spec
  Tools and information for local EITC outreach efforts.
• EITC Marketing X-Press
  EITC outreach and tax preparation assistance efforts can customize pre-approved sell sheets, flyers, advertisements, postcards and more. Registration required.
• CBPP: Earned Income Tax Credit Analyses
  Research paper, professional testimony, and other analyses of the federal and state earned income credits.
• Northwestern University/University of Chicago Joint Center for Poverty Research (JCPR): EITC Information Clearinghouse
  Current JCPR research on the EITC.

Volunteer Income Tax Assistance Program (VITA)

Many communities help their residents learn about and claim the EITC by participating in the Volunteer Income Tax Assistance Program (VITA), administered through the IRS. For more information on VITA and to locate the VITA site closest to you, call 1.800.829.1040 or visit the IRS's Web site.