eitc and the irs

EITC and the IRS

• Leland Smith and Brian Cahill

• IRS Seattle WA

• Contact – Your Local Coalition’s Coordinator

• Sylvia Martinez – IRS SPEC(206)220-5515

sylvia.L.Martinez@irs.gov

EITC and the IRS

• Free tax Preparation in WA

• IRS Staff & Functions

• Reaching Low Income

• Tax Credits and Financial Education

EITC aka EIC

• Earned Income Tax Credit

• Enacted in 1975

• Expanded in 1990, 1993, and 2009 (ARRA)

• Refundable!

• Parents with children & Low Income Singles

• Offset Social Security Withholding FICA

EITC Expanded!

The American Recovery and Reinvestment Act (ARRA)

• Temporary (TY 09 10) increase in EITC• For taxpayers with three or more qualifying

children. • Max EITC for this new category is $5,657

EITC Expanded!

ARRA also upped the phase out for all married couples filing a joint return.

Phase out:Begins at $21,420 for MFJ with children Gone at:

$40,463 for one child, $45,295 for two children and $48,279 for three or more children.

For MFJ with no children, phase out starts at $12,470 and

Completely phased out at $18,440.

Income Limits for 2009

• $43,279 ($48,279, MFJ) with 3 or more children

• $40,295 ($45,295, MFJ) with 2 or more children

• $35,463 ($40,463, MFJ) with 1 child

• $13,440 ($18,440, MFJ) with no children

The Maximum Benefit for 2009

• $5,657 with 3 or more children

• $5,028 with 2 or more children

• $3,043 with one child

• $457 with no children

EITC is one of the Largest Antipoverty Programs

• 24 million received almost $48 billion for tax year 2007

• Participation is estimated at 75% to 80%

• Five million people, half of them children, lifted out of poverty each year due to EITC

• The cost of administering EITC program ratio to claims paid is less than one percent

Basic Qualifications

• Have a valid Social Security number

• Not file as “married filing separate”

• Not file Form 2555 or Form 2555-EZ (related to Foreign Earned Income)

• Meet the investment income limitation ($3,100 for tax year 2009)

• Have earned income

• Not be the qualifying child of another person

• Be a U.S. citizen or resident alien for the entire year

Free Tax Prep in WA

• Coalitions

Free Tax Prep in WA

• Coalitions

• VITA and Tax Aide◦ Nearly 72,000 returns total free returns,

◦ Nearly 50,000 by Tax Aide

◦ More than 10,000 Military VITA

IRS Staff & Functions

• Data & Mapping

Dollars$695,716,346

5,349,297,531

EITC By Zip Code

IRS Staff & Functions

• VITA and Tax Aide Site Set Up and Support

• Volunteer Training

• Tax Wise Software

• Materials and tools

IRS Staff & Functions

• VITA and Tax Aide Site Set Up and Support

IRS Staff & Functions

• EITC Assistant

IRS Staff & Functions

• EITC Central

EITC CENTRAL

Partner Page

EITC CENTRAL AGAIN

Reaching Moderate Income

• Why the IRS needs your help.

Who are we missing? • Living in rural areas • Self-employed • Disabled • Childless • Not proficient in English (LEP)• Older (grandparents) • Recently divorced, unemployed, or

experienced other changes to their marital, financial or parental status

EITC By Zip Code Different Scale

Promote EITC• Insert tax credit information in monthly

utility bills or online newsletters.

• Incorporate tax credit information when promoting energy payment assistance programs.

• Train customer service employees

• Display posters

• Alert your own employees

• Support free tax preparation sites with printers, computers etc.

EITC and the IRS

Tax Credits and Financial Education

Tax Credits and Financial Education

• EITC as the “Lab” Portion of the Financial Literacy Class

• The only way to claim EITC is to file a tax return.

Pub 4716

Publication 4537, EITC Made EZ bookmark

Publication 4471, EITC Made EZ brochure

Publication 73271N, Social Security Card Poster

Why is outreach needed?

• As many as 15-20% of eligible workers don't claim the EITC

• 75% of those who claim the EITC pay commercial fees to file returns which can include loan fees and charges for other related products.