Module 3 - Lecture 4 - Earned Income Tax Credit

PAF 101
Module 3, Lecture 4
“Do not confine your children to your
own learning, for they were born in a
different time.”
–Hebrew Proverb
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As of 2/27/2015
Group #
Income Tax
Credit (EITC)
Presented by: Maggie Tarasovitch
February 27, 2015
About Me
• Junior Policy Studies Major
• PAF 315 TA
• Background of the project
• Coplin in 315
• Started in December
Maggie Tarasovitch
The EITC Law
•“The federal earned income tax credit (EITC) reduces
the amount of taxes owed, and refunds the difference
if the credit is larger than the amount owed.”
(Center on Budget Policy Priorities website)
Basic Facts
• The tax helps the “working poor,” those tax payers whose
limited work hours and low wages keep them in the lowincome tax bracket
• The refund depends on a tax payer’s:
1. Adjusted Gross Income (AGI), which is gross
income minus specific deductions* that a tax
payer is eligible to take
2. The number of (qualifying) children
• Common examples of deductions are “alimony payments made to a
former spouse, contributions to certain retirement accounts (such as
a traditional IRA) and the deduction for tuition and fees.” (Turbotax
Basic Facts
Eligibility based on AGI and Number of Children
(Tax Filing for the Work Year 2014)
AGI must be less than…
AGI must be less than…
(Married, jointly filed)
Credit Possible
No Qualifying Children
$ 14,820
$ 20,330
$ 503
One Child
$ 39,131
$ 44,651
$ 3,359
Two Children
$ 44,454
$ 49,974
$ 5,548
Three or more Children
$ 47,747
$ 53,267
$ 6,242
Basic Facts
• EITC is acquired when tax payers fill out regular tax returns
and complete an additional seven lines of information
• Earnings do not include social welfare program, dividends,
interest, and capital gains.
• Earnings do include wages earned from self-employment
income and regular income
• Full or part time work
Example Family: Jessica Smith
Jessica Smith works as a cashier at McDonalds. She is a single-mother
of two children.
• Food-preparation sector employs 11 million people
• Accounts for about 1 in every 11 jobs
• Provided a median wage of only $9.09 an hour
• Jessica, as full-time, year-round worker (at $9.09/hour) makes
annual earnings of $18,180.
(Center on Budget Policy Priorities website)
Example One:
Based on our example family, “Jessica Smith.”
Federal Tax Withholding
“Qualifying persons who file federal tax returns get back some or all of the federal
income tax withheld from their pay during the year. Even workers whose earnings
were too small to have taxes withheld can get the EIC.”
Jessica had:
+ 1365.75
2,273.25 in taxes withheld during the year.
Thus her “extra income” is essentially:
5,387 ----> Full Amount she gets back from EITC
- 2,273 ----> Amount withheld in taxes this year
$ 3,114
How much Jessica gets paid
an hour
$18,180 ----> Salary During the Year
+$3,114 ----> “Extra Income” back from Government
$21,294 ----> Total End of Year Earnings
2,000 total hours/yr
$21,294 / year
÷ 2,000 hours/ year
$10.65 /hour
Additional Facts
• The EITC may be paid as a lump-sum refund at the end of the
year (after submitting taxes) or as an advance payment option.
• Most families decline the advance payment option because of
variability in earnings throughout the year, which may lead to
repaying the government
• A study shows that groups who may be unaware of the credit
but are eligible include:
o very poor parents
o those whose primary language is not English
1975: EITC is proposed by Nixon but created and signed by
President Ford in order to help alleviate the burdens of
social security and Medicare taxes for low-income
1970s - 2008: The credit is made permanent, adjustments were
made regarding categories, the percentage of credit, and
those eligible for the credit
2013: Congress extended the 2009 American Taxpayer Recovery
Act through 2017
• The 2009 Act essentially extended the EITC and added
the “third tier,” or level to help families with more than
two children
• In 2013, about 6.2 million people were lifted out of poverty, including
about 3.2 million children.
• Studies suggest that the EITC “increase(s) aggregate hours worked.
Thus, EITC seems to promote one broad goal of welfare reform—
encouraging work among single-parent families— without reducing
overall hours worked” (Beverly, 2002).
•“What research has shown, however, is that most EITC recipients only
get the credit for two consecutive years or less. Many of them soon
move up the income ladder and start paying taxes back into the
system.” – The Washington Post
•The EITC reduced federal tax revenue by $59 billion in 2012 whereas
the cost of Supplemental Nutrition Assistance Program (food stamps)
was $80 billion (Hungerford, 2013).
Federal vs. State
• 24 states and the District of Columbia
administered their own state EITCs
•When you apply for the Federal EITC,
you are automatically enrolled for the
•Federal refunds faster (about 2 weeks),
and the State takes a little while longer
•States typically calculate EITCs as a fixed
percentage of the federal credit
o Percent of Federal Credit for
NYS: 30%
How do citizens apply for EITC?
•“VITA is a free, IRS-sponsored program to help low and middle-income workers
have their federal and State personal income taxes prepared and filed
electronically at no cost.”
•“VITA also ensures that workers receive all the tax credits to which they are
(New York State website)
History of VITA
• Gary Iskowitz at California State University Northridge started
program with his accounting students to help the local
• Originated with the Tax Reform Act of 1969 as part of the
increased emphasis on taxpayer education programs.
• 2007: IRS VITA Grant is created to provide funding to partner
organizations, which enables Volunteer Income Tax Assistance
(VITA) sites to extend services
• Heighten quality control, improve accuracy of returns, enhance
volunteer training
For-Profit versus VITA
Why VITA Helps
• Individuals save by not paying for tax preparation
• Electronic filing is increasing at VITA sites and allows workers to
get their money faster
• Tax preparation volunteers are well trained and reduce the
error rate
VITA in Syracuse
The Problem
•Too few eligible citizens file for the EITC in
Onondaga County
Total Filers in Onondaga County in 2013: 211,656
Filers that are eligible for VITA services: 133,492 (63.07%)
Eligible Filers that used VITA services: 7,249 (5.43%)
Unknown Percent: Private sector filing of the tax returns, individual
* Those who are eligible are files who reported an adjusted gross
income of less than $53,000
**Data are based on last year’s tax return season
Data are from the United Way, who received the data from the IRS
VITA in Syracuse: CA$H
• CA$H stands for Creating Assets, Savings and Hope
• Apart of the United Way
•The primary focus is to collaborate with as many
Onondaga County VITA site providers as possible in order
to expand the scope and the efficiency of the VITA efforts
in our region.
Value of EITC in Syracuse
Value of Federal EITC :
All County:
$ 3,097,509
CA$H sites only:
$ 2,576,685
Value of Fed & State EITC:
All County:
CA$H sites only:
Average Refund per Filer:
All County:
CA$H sites:
$ 1,264
$ 1,620
*2013 data
What Have We Done?
What We’ve Done
Learning as much as possible & Don’t re-create the wheel
• Community Outreach
• Hands- On Learning
Volunteer at VITA site
Provide Expertise (public relations, surveys)
• Learn About Policy
LeMoyne College Tax Accounting Course
Syracuse University’s policy
Causes of low EITC/VITA rates
• Not enough volunteer tax preparers
• Not enough VITA sites
• Lack of knowledge among potential participants
• People resist change
*Information is based on conversations with Site Coordinators
and United Way
* No “hard” data
• Emailed every Site Coordinator at CA$H Coalition VITA sites
• Ask about the causes
• Ask, “How can we help you?”
• In-take Volunteer
*not a CA$H site
• Create Press Release
• Create Exit Survey
• Recruit Volunteers
Policy: Le Moyne College
Le Moyne:
• Undergraduate students take a three credit ACT-301 Individual
Income Tax
•Requires: 8 hours of volunteer work as part of students’ grades
•There are 56 students enrolled in the course this year. The rest of
the accounting department is welcome to volunteer however it is
not required.
• Graduate student is the coordinator who organizes the site, 5 tax
preparers, one greeter, and one quality reviewer
Policy: Syracuse Beta Alpha Psi
Syracuse Univeristy:
•Beta Alpha Psi honor society for accounting students has 60 –
70 members
•VITA Coordinator April GU:
o “Our volunteers are BAP members who are willing to offer advice on
filing tax returns and they do not do the actual tax return for people.”
o Program involves one-on-one education for students and SU
community on how to complete tax returns
o March 27th and April 3rd in Whitman.
Spring 2015
• Continue to learn as much as possible
• Push as many fliers out into the community as possible
• Volunteer / observe the SU site
• Connect with Sites at the end of Tax Season (April 15th) to
address which areas are
top concerns for next year
• Work with Whitman to get more accounting students on
board– IMPRESS program?
• Create a 10 month plan: June 2015 – April 2016
Fall 2015
Goal: Increase the number of Onondaga County citizens who
use VITA sites to get
their taxes completed
Steps: Increase the number of Syracuse University students who
volunteer at VITA
• Train Tax Preparers
• Train CA$H Coaches
Create an SU VITA site for SU employees?
On-Going Project
• Interested students should contact Ben Wahl after class
• Name and Email Address
• Could be this semester or next semester
Looking to get involved?
•Three volunteer positions include:
o 1199/SEOC Greeter
o CA$H Coach
o Tax Preparer (possibly)
*Would count for your required 5 volunteer hours
For next class…
Paper due 3/18
Email TA societal problem with geographic
location by 8pm tonight
VITA in Syracuse: CA$H
•There are three parts to the sites
o Preparing taxes
o CA$H Coach Volunteer gives Financial Education Literacy
o Other providers of opportunities for low income
citizens: health insurance navigators, credit unions, etc.
VITA in Syracuse: CA$H
These are the sites:
• Shopingtown Mall *P.E.A.C.E.*
• Syracuse Education Opportunity Center
• Assisi Center
• St. Albans church
• Beauchamp Library (Onondaga County Library)
• Le Moyne College Library
Public Relations
Katie Grant working with
CA$H Coalition
• Volunteer Coordinator
• Re-create marketing
• Which are
• Too much
information /
Current Positions
1199/SEOC Greeter: Requires a quick 10 question quiz online (I've taken it. It's easy.
"Codes of Conduct.")
(1) Greet patrons as they walk in.
(2) Being friendly, saying hello, distributing the first bit of paperwork the patrons must fill
out, and answering questions
CA$H Coach: Requires a quick 30 minute orientation.
(1) Greet clients at the VITA site and explain the resources sheet
(2) Help VITA participants complete the Saving Plan form
(3) Potentially answer some basic questions about accounts, money, and ways to save
Tax Preparer: This role requires you to become IRS certified.
(1) Process can take about 8 hours.
(2) Reading information online and passing two "exams." There are sets of practice
questions to help you.
(3) Once this is complete, you volunteer at the VITA sites and help the low-income
individuals file their taxes
(4)This requires the most work, but it would look great on a resume
Thank you.