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TEXAS ECONOMY AND FAMILIES TO RECEIVE $5-6 BILLION IF TEXANS CLAIM THEIR EITC

TEXAS ECONOMY AND FAMILIES TO RECEIVE $5-6 BILLION IF TEXANS CLAIM THEIR EITC

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Published by Marco Ramirez
“Many Texas families are confronting financial hardship as recession grips our nation, making it vitally important that all those
eligible take advantage of the federal Earned Income Tax Credit…. For a family struggling to pay medical bills, stave off foreclosure,
or keep up with household expenses, Earned Income Tax Credits can be a crucial lifeline….” (HR 193)
“Many Texas families are confronting financial hardship as recession grips our nation, making it vitally important that all those
eligible take advantage of the federal Earned Income Tax Credit…. For a family struggling to pay medical bills, stave off foreclosure,
or keep up with household expenses, Earned Income Tax Credits can be a crucial lifeline….” (HR 193)

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Published by: Marco Ramirez on Feb 19, 2009
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05/10/2014

 
 February 18, 2009 Contact: Don Baylor,
baylor@cppp.org
No. 09-367
TEXAS ECONOMY AND FAMILIES TO RECEIVE $5-6 BILLIONIF TEXANS CLAIM THEIR EITC
“Many Texas families are confronting financial hardship as recession grips our nation, making it vitally important that all those eligible take advantage of the federal Earned Income Tax Credit…. For a family struggling to pay medical bills, stave off foreclosure,or keep up with household expenses, Earned Income Tax Credits can be a crucial lifeline….” (HR 193)
The Texas House of Representatives recently passed this resolution recognizing January 30
th
as Earned Income Tax Credit(EITC) Awareness Day, in conjunction with the IRS, to raise public awareness of this refundable tax credit and the free taxpreparation sites available to EITC filers.
i
As the nation’s most successful anti-poverty program, the EITC helps workingfamilies meet basic needs and provides a platform for their financial stability and success, while also acting as a powerfulstimulus on local and state economies. Texans can apply for the EITC online using the IRS’s Free File service or by visiting alocal Volunteer Income Tax Assistance (VITA) site.
ii
To find the address of the VITA location nearest you, visit www.raisetexas.org/idasearchor call the IRS toll-free at (800) 829-1040. Also, to learn about HB 955, a bill introduced by Rep. Mike Villarreal to create a VITA grant program that would expand community tax center capacity, visithttp://www.legis.state.tx.us/BillLookup/history.aspx?LegSess=81R&Bill=HB955.
What Does the EITC Do for Texas?
iii
 
The EITC tremendously benefits Texas in two significant areas:
The EITC supports working families with children
Fundamentally, the EITC is about strengthening working families withchildren; for every dollar claimed by a Texas household, about 98 centsgoes to a family with at least one child. Each year, the refundable taxcredit enables hundreds of thousands of families to meet basic needsand build a ramp to the middle class. Also, the EITC provides a once-a-year opportunity for many working Texans to start or continue savingfor worthwhile goals, such as college savings or a home down payment.
The EITC fuels local and state economies
Each year, the EITC delivers about $5 billion in refunds that stimulateeconomic activity during a time when many consumers traditionally cutback their spending. To a large extent, EITC refunds are spent locally,bolstering sales tax receipts while driving economic development. TheEITC, like most things, the EITC is bigger in Texas, with more thanone-in-five tax filers receiving EITC (20.9 percent), a much higherproportion than in the U.S. as a whole (15.6 percent). Over the pastfew years, the EITC share of Texas filers fell, but it will likely risedramatically in the coming years.
Quick Facts on the EITC in Texas:
 
2.3 million Texans—21 percent of allfilers—received the EITC in 2008,injecting $5.2 billion in refunds into thestate economy.
 
Each dollar of EITC generates $1.58 inlocal economic activity.
 
However, as many as one-in-four eligibleTexans fail to claim the EITC, leaving$1.4-$1.9 billion unclaimed in 2009.
 
Two-thirds of Texas EITC filers (65percent) paid for costly refundanticipation loans (RALs) or checks(RACs) in 2008. Paid tax prep, RALs, andRACs drain $350 million from Texans’EITC refunds every year.
 
Only 1 percent of EITC filers have their tax returns prepared for free at a VITAcommunity tax center.
 
 
2
 
Texas Unemployment Rate in theCurrent Recession (Dec. 2007 - Dec. 2008)
6.0%4.2%
4.0%4.4%4.8%5.2%5.6%6.0%Dec07Jan08Feb08Mar08Apr08May08Jun08Jul08Aug08Sep08Oct08Nov08Dec08
EITC in 2009: Who’s Eligible and Whom Are We Missing?
Eligibility for the EITC depends primarily upon a taxpayer’s family income and size. These factors also determine the size of the taxpayer’smaximum EITC refund. For tax year 2008, the income limits andmaximum refund amounts for EITC are as follows:
Number of QualifyingChildrenFor Single/Head of Household, IncomeMust be Less ThanFor Married Filing Jointly, IncomeMust be Less ThanMaximumEITCRefundNone
$12,880 $15,880 $438
One
$33,995 $36,995 $2,917
Two or More
$38,646 $41,646 $4,824
Source: IRS’s EITC Central,http://www.eitc.irs.gov/central/abouteitc/ranges/  
Because of the national recession, far more Texans may qualify for theEITC this year due to layoffs, reduced hours, or otherwise diminishedincome. The unemployment rate in Texas shot up notably, from 4.2percent in December 2007 to 6.0 percent in December 2008, and many of these newly jobless Texans may be eligible for the EITC for the first time.
Source: Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS)
In fact, the unemployment rate is a leading indicator of the share of EITC-eligible Texans. As the chart below shows, the percentage of taxpayersreceiving EITC fell with the booming economy and decliningunemployment of the late 1990s. Then, following the tech bubble burstand the rising unemployment trend that began in early 2001, the EITC-recipient share climbed up again from 2002 through 2005. A few years
What to Take to the VITA Site:
 
Valid photo ID
(you & spouse)
 
 
Copy of 2007 tax return
(if available)
 
 
Dates of birth for all persons listedon the return
(typically you, yourspouse, and children born in 2008 orearlier)
 
 
Social Security numbers or IndividualTaxpayer Identification Numbers(ITIN) for all persons listed on thereturn.
(Take the Social Security cardsor ITIN letters if available to ensureaccuracy.)
 
 
All income documentation:
W-2forms; 1099 forms; self-employmentrecords; Social Security,Unemployment, or other benefitsstatements; and any documentsshowing taxes withheld
 
Bank account name, number, andABA routing number for directdeposit
(i.e. voided check or bankstatement)
 
If any of the following apply toyou, take documentation:
 
Child care expenses:
provider’s name,address, and SSN or TIN (federal ID #)
 
 
Mortgage company statements
 
Property tax bills
 
College tuition and student loaninterest statements
 
Alimony paid or received
 
Adoption expenses
 
Additional forms of income,
such asscholarships & fellowships, prizes andawards, or lottery/gambling winnings
 
 
Any other relevant documentsreceived,
including notices from the IRSor the Texas Comptroller
 
 
 
3
 
after the Texas economy began to improve in mid-2003, the EITC-recipient share leveled off at 23.5 percent and thendeclined again. In 2008 (for tax year 2007), the share of Texas tax filers receving EITC was 20.9 percent. As recession grips thenation and our unemployment rate shoots back up again, we can expect to see the EITC-recipient share rise again as well.
Unemployment a Leading Indicator of EITC Recipiency in TX
4.0%4.5%5.0%5.5%6.0%6.5%7.0%Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
   U  n  e  m  p   l  o  y  m  e  n   t   R  a   t  e
20%21%22%23%24%
   S   h  a  r  e  o   f   F   i   l  e  r  s   R  e  c  e   i  v   i  n  g   E   I   T   C
Unemployment RateEITC-Recipient Share
 
Sources: Unemployment data from Bureau of Labor Statistics, Local Area Unemployment Statistics (LAUS); EITC-Recipient share calculated fromIRS data, SOI Tax Stats – Historical Table 2 and EITC Central. Note: EITC-Recipient Share refers to the percentage of tax filers receiving EITC in the corresponding year, for the previous (tax) year. For example, the 22.7 percent data point shown at Jan-03 represents EITC recipiency in 2003 for TY02 and reflects the unemployment rate growth over 2002.
 Although EITC recipiency will likely increase again in the coming years, many Texans may miss out this year on much-neededrefunds if they have not qualified before and do not already know to claim the credit. Even during economic expansions, theIRS estimates that 20-25 percent of qualifying workers fail to claim the EITC. Recently unemployed workers in particular runa greater risk of failing to claim their EITC, along with certain other groups of people who may earn income but not enoughto compelled to file. Typically, these at-risk individuals include those who are:
 
Living in rural areas;
 
Self-employed;
 
Disabled;
 
Childless;
 
Not proficient in English;
 
Older (grandparents); and
 
Recently divorced, unemployed, or experienced other changes to their marital, financial or parental status.Texas must reach out to these populations to ensure that Texas receives maximum federal dollars and to bolster family financial stability in the midst of economic uncertainty.

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