Released: March 28, 2003

Also see: Think Before Spending Tax Refund -- Take Time to Decide How to Invest

Tax Credits Offer Millions In Benefits for Kansans

MANHATTAN, Kan. – A letter from the Internal Revenue Service (IRS) doesn’t always mean bad news. In fact, taxpayers, including many Kansans, may receive letters from the IRS explaining that they are eligible for an earned income tax credit or EITC, said Cindy Evans, Kansas State University Research and Extension agent in Shawnee County.

Such letters may be ignored or misunderstood, and, as a result, millions in tax credits go unclaimed.

The EITC program is intended to help people who are working in entry level, low-to-moderate income or part-time jobs. Benefits may include a reduction in taxes or "cash back." Because the EITC is a refundable tax credit, it first reduces taxes owed. And, depending on the amount of the credit, it also may result in a sizable refund for the taxpayer.

In Shawnee County last year, the average benefit – about $1,500 – allowed many residents to rise above the poverty line. Their benefits totaled more than $15 million.

In the state as a whole, the potential tax credits amount to significantly more. In 1999, for example, tax credits for income-eligible residents exceeded $200 million, Evans said.

Fewer than 25 percent of the income-eligible Shawnee County residents claimed the EITC tax credit. Experts speculate that thousands of others who are eligible for the EITC tax credit don’t claim it, she said.

While the EITC returns federal dollars to the states, Kansas also is one of the 14 states that matches at least part (raised this year to 15 percent, up from 10 percent previously) of the EITC benefit, Evans said.

As an Extension agent, Evans doesn’t claim to be a tax expert. Through her work with nutrition education and family financial management, however, she has had an opportunity to work with residents – both individuals and families – who for such reasons as job loss, divorce, illness, injury or disability run short of the funds they need to provide food, medical care, and other needed services for their families and themselves.

Many who qualify for assistance aren’t getting it, she said.

In looking for ways to help Shawnee County residents access benefits, Evans asked herself, "Why is this tax benefit overlooked?" and, "How can Extension help?"

In working with the IRS to help families claim benefits, Evans said that she found people to be helpful, yet aware that their agency is not always perceived positively.

Evans’ contacts with the IRS were encouraging. They acknowledged that Extension is well- established in communities and trusted as a reliable source of information, she said.

Literacy also can be an issue, as can language – bureaucratic terms can be confusing, Evans said.

A tax preparer can quickly identify people who qualify for the EITC or other benefits, such as a child tax credit that can be as much as $600 per child. But many who qualify for the benefits cannot afford to hire a tax preparer, she said.

In Kansas, though, volunteer tax preparers from AARP and the IRS prepare thousands of tax returns annually for free. The services can be particularly helpful to taxpayers whose adjusted gross income is in the low-to-moderate range, up to $40,000, Evans said.

A list of volunteer tax preparers is available at county K-State Research and Extension offices. Volunteer tax sites also can be accessed on the Internet at http://www.aarp.org/taxaide/home.html

EITC benefits/refunds vary with income, household size, number of dependents, etc. If, during 2002, a resident lived with one child and earned less than $29,201 (or $30,201, if married), he or she may be eligible for a refund of up to $2,506. With two or more children and earnings of less than $33,178 (or $34,178, if married), benefits can be as much as $4,140.

With no children living at home, residents between the ages of 25 and 64 who earned less than $11,060 may be eligible for benefits up to $376, she said.

The EITC also is retroactive for up to three years for wage earners who qualified, but have not claimed benefits due them. Some are entitled to thousands of dollars, she said.

"Helping people access tax credits also benefits the local and state economy. Residents who receive refunds report that they use the money to pay bills and provide food, health care, and other essentials for their families and themselves," said Evans, who encourages Kansans to ask about the EITC and other tax credits that they may qualify for.

For more information on food, nutrition, health, personal safety, financial management, and other educational programs, Kansans can contact any local K-State Research and Extension office.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by:
Nancy Peterson, Communications Specialist
nancyp@oznet.ksu.edu
K-State Research& Extension News