State of the Union and the Earned Income Tax Credit – What it Means for You and Your Taxes
By Kathy Pickering
Executive Director of The Tax Institute At H&R Block
During last night’s State of the Union address, President Obama discussed his proposal to expand the Earned Income Tax Credit – known as the EITC. This credit helped more than 26 million taxpayers last year claim an average of $2,335 when it was time to file their tax returns.
Here is the transcript of what the President said last night about the EITC:
“There are other steps we can take to help families make ends meet, and few are more effective at reducing inequality and helping families pull themselves up through hard work than the Earned Income Tax Credit. Right now, it helps about half of all parents at some point. Think about that. It helps about half of all parents in America at some point in their lives. But I agree with Republicans like Senator Rubio that it doesn’t do enough for single workers who don’t have kids. So let’s work together to strengthen the credit, reward work, help more Americans get ahead.”
But knowing about the credit isn’t the same as understanding how it works and effectively claiming it at tax time. The IRS indicates that at least 20 percent of families eligible to claim EITC do not, leaving up to $6,400 on the table per family.
With tax season officially opening this Friday, Jan. 31, our experts stand ready to help taxpayers navigate this particular part of the tax code. In fact, last year, we filed 1 in 5 returns claiming the EITC and have specialized expertise in the Earned Income Tax Credit (EITC).
Part of being experts on individual taxes and the EITC means we stay on top of all legislative and regulatory proposals that impact the individual taxpayer. The EITC was first enacted in 1975 and was intended to help alleviate poverty and incentivize individuals to work. The current discussions in Washington, D.C. have the same focus – how the EITC can be maximized to help working families and individuals.
We will keep our eye on all proposals and be sure to let people know how it may change their taxes. Keep in mind that these are just proposals. We don’t know if or when they will become law. In the meantime, as coverage from the State of the Union continues and is debated, it’s important for taxpayers to remember that the EITC is currently in place and our experts are available to help.
20 percent of eligible taxpayers do not claim the Earned Income Tax Credit due to the misunderstanding of the requirements which can be proven costly.
There are several commonly overlooked tax benefits you can claim. Make sure you read up on them so you don't end up leaving money on table with your tax refund.
The earned income tax credit is one of the nation’s largest anti-poverty programs and an important piece of annual income for millions of Americans.