Don’t leave thousands on the table this season

Widely considered the federal government’s most effective antipoverty program, the EITC puts money back into the pockets of qualifying low- and moderate-income working taxpayers when they file their tax returns. Qualifying workers can get the money even if they don’t owe any taxes—but they must file in order to claim the credit (even if their income is so low that they normally would not file a tax return).

With EITC credits ranging from $538 for childless filers to $6,660 for filers with three or more children during the 2020 tax year, the 20% of eligible workers who fail to file and claim the credit are leaving a lot on the table. For reference, the average amount of EITC received nationwide in 2019 was about $2,476—enough to make a real impact on workers’ financial wellbeing through the opportunity to increase their savings, reduce debt, or make needed home and auto repairs.

Just announced: The U.S. coronavirus relief package announced on Dec. 20 includes a “lookback” provision that will allow low-income workers to apply their 2019 earned income to their 2020 tax returns for the purposes of calculating the EITC or Additional Child Tax Credit (ACTC). For both these credits, the more you earn (while still remaining below the maximum), the higher your credit. However, millions of qualifying workers lost their jobs and had lower incomes in 2020 due to pandemic-related business closures. The lookback measure will allow filers to receive a credit in line with their normal earnings level, rather than be penalized with a lower credit on top of reduced earnings. However, Neighborhood Trust Financial Partners cautions that it will be up to taxpayers to actively “opt in” to the lookback provision (it won’t automatically occur). With millions of filers set to turn to online tax filing services for the first time due to the pandemic, it is more important than ever to spread the word and ensure filers know to check this option, if applicable!

Get Credit for Your Hard Work provides all the crucial information consumers need to file for the EITC, as well as where to get more information or tax filing assistance.

The IRS will begin accepting e-filed tax returns on Jan. 25, with returns due by April 15. Refunds due for returns claiming EITC or the Child Tax Credit (CTC) may be delayed until late February, giving the IRS time to verify the credits. Nevertheless, the agency recommends that consumers file their returns as early as possible to prevent fraud. Learn more about the filing and refund timeline here.

Follow your refund on the IRS’s Where’s My Refund? webpage or the IRS2Go app.

Consumer Action will join hundreds of other organizations in promoting the Earned Income Tax Credit on EITC Awareness Day, which this year falls on Jan. 29 (always on the last Friday in January). The event is a national effort to increase awareness of the EITC (as well as the Child Tax Credit, the Additional Child Tax Credit and the American Opportunity Tax Credit); motivate workers to find out if they qualify; and steer low-income filers to free tax prep assistance. If you work with an organization that would like to help get the word out, visit the IRS website to search for updated EITC outreach tools in January.