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Utilizing Tax Credits

What Federal Tax Credits Benefit Low Income Families?. Two major federal tax benefits for low-income workers:Earned Income Tax Credit (EITC)Child Tax Credit (CTC). EITC

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Utilizing Tax Credits

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    3. EITC & CTC are Refundable Credits Credits offset any tax liability Excess received as refund

    4. Purpose of EITC EITC was first enacted by Congress in 1975 to: Reduce the tax burden on low income workers Supplement wages Make work more attractive than welfare

    7. How Does EITC Reduce Tax Burden on Low Income Workers?

    8. How Does EITC Supplement Wages?

    9. What is the Child Tax Credit? $1,000 for Each Qualifying Child Partially Refundable Starting in 2001 Working Families Can Receive Both the Child Tax Credit and the Earned Income Tax Credit in the Same Year

    10. What Is the Economic Impact of EITC in the Bay Area?

    11. Why Should Communities Be Interested? Studies indicate that 15-25 percent of eligible workers are not claiming the EITC. A recent Treasury Department audit found that over 600,000 potentially eligible families did not claim the CTC in TY 2001.

    12. Estimated Potential Impact of Unclaimed EITC in Bay Area 38,000 Potential Additional EITC Recipients $18.3 Million Dollars of Potential EITC Refunds Not Received Estimates based on filed return data and independent Research Studies for Alameda, Contra Costa, and San Francisco Counties.

    13. Why Is There a Need For Action Around EITC Education and Outreach? Limited Education, Language and Financial Abilities IRS Efforts in the Past Have Failed to Reach All Eligible Families Proactive Approach Required to Access EITC and Other Tax Credits

    14. Why Is There a Need For Free Tax Preparation Services? Inability of Working Families to Prepare Their Own Returns Preserve the Full Value of the Credit

    15. Why Is There a Need To Link Asset Building/Financial Literacy Services? 22% of Families With Income Less Than $25,000 Have No Bank Account Forced to Use Check Cashers, Refund Anticipation Loans, etc. Lack of Participation in Existing Home Ownership and Financial Literacy Programs Providing Financial Skills Is Key to Gaining Economic Independence

    16. Linking the Pieces Outreach – Reach Eligible Families Not Currently Claiming the Credit Free Tax Preparation – Preserve the Value of the Credit Asset Building – Introduce Financial Literacy at Tax Preparation Sites

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