Released: March 15, 2005

Millions Missed: Federal Tax Credit, Matching State Funds Overlooked

TOPEKA, Kan. – In 2004, approximately 21 million taxpayers received about $37.5 billion in Earned Income Tax Credits (EITC), but millions of dollars more went unclaimed.

The Internal Revenue Service (IRS) estimates that 25 percent of the taxpayers eligible to claim the EITC fail to apply for it.

The tax benefit program stems from welfare-to-work initiatives put into place to help low- to-moderate income families rise above the poverty level determined by the United States Department of Health and Human Services at $19,350 for a family of four, said Cindy Evans, Kansas State University Research and Extension family and consumer sciences agent in Shawnee County.

Refunds for the tax credits range from a few hundred dollars up to several thousand dollars. Taxpayers who previously qualified, but failed to claim the tax credits, also may file or amend their tax return for up to three years retroactively.

“Many who those who fail to apply for the benefits simply don’t know about the credits or how to apply for them,” said Evans, who offered this example: Low-income families who don’t owe taxes are not required to file an income tax return, but would need to file a return in order to claim the EITC or other tax credits.

Evans’ work as an Extension agent includes consumer education such as financial management. During tax season, she directs taxpayers to free tax assistance sites where trained volunteers can complete their federal and state returns and file the returns electronically.

In Shawnee County, there are 15 sites that provide free income tax preparation. Trained tax preparers at the sites are volunteers for the IRS’ Volunteer Income Tax Assistance (VITA) program or the American Association of Retired Persons (ARRP).

“Most people typically want a fast refund, and filing electronically does speed the process,” she said. “Filing early – in March, before April 1 and the approaching rush toward the tax deadline, April 15, can reduce waiting time for a refund.”

The tax process also can be delayed by a taxpayer’s failure to notify the IRS of a name change after marriage, divorce or remarriage and errors in Social Security numbers or a child’s birth date.

To simplify the tax preparation process, Evans recommends gathering the following information to take with you to a volunteer or other income tax preparer:

* Taxpayer’s copy of last year’s tax return;

* W-2 and 1099s from all sources;

* Social Security numbers for the taxpayer, spouse and children in the household or being claimed as dependents on the tax return;

* List of dependent children’s complete names and birth dates;

* Name, tax identification number or Social Security number of your child’s care provider and the amount paid for child care;

* Other relevant information about income and expenses;

* Bank routing and account numbers for direct deposit.

“Families that qualify for the EITC may be eligible for an advance refund that will become part of their paycheck. An advance EITC will reduce next year’s refund by that amount, but it provides extra money through the year to help meet living expenses,” Evans said.

Workers can obtain a W-5 Advance EITC form from their employers, she said.

To learn more about the IRS’ VITA program and volunteer income tax services provided by the American Association of Retired Persons (AARP) and other service agencies in Shawnee County, contact the Shawnee County Extension office at 785-232-0062. Interested persons living outside Shawnee County may contact their county or district K-State Research and Extension Office.

IRS publication 596, Earned Income Credit, includes information about eligibility and instructions for claiming the tax credit. Copies of the publication are available in English and Spanish and available at http://www.irs.gov  or by calling 1-800-TAXFORM (1-800-829-3676).

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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
nancyp@oznet.ksu.edu
K-State Research& Extension News