Eligible Californians missing out on tax credits worth hundreds of dollars, report says

Hundreds of thousands of lower income Californians in 2017 did not claim a state tax credit designed to provide extra cash for households like theirs, according to a new report by the nonpartisan California Policy Lab at UC Berkeley.

That means those Californians missed out on a collective $76 million in unclaimed tax credits that year, the report found.

The study looked at Californians who received state-funded food assistance through the CalFresh program and assessed how many of them also could have claimed the California Earned Income Tax Credit, which provides hundreds of dollars to lower-income families.

The report released on Wednesday found that 626,000 Californians who received CalFresh, the state’s food assistance program for low-income Californians, did not claim the California Earned Income Tax Credit in 2017.

Overall, nearly 950,000 of households enrolled to receive CalFresh qualified for the California Earned Income Tax Credit in 2017, but only 53% claimed it, according to the report.

In the study, researchers say they focused on CalFresh households because they are “very likely to fall below the tax-filing income threshold.”

Additionally, researchers used CalFresh enrollment records to find household size and income information to calculate California Earned Income Tax Credit eligibility of tax filers and non-tax filers.

“I was most surprised by how many households — tens of thousands of households — did file a state tax return, but simply didn’t claim the credit even though according to information on their very own returns appeared eligible,” said Matt Unrath, a co-author of the report and research fellow at the California Policy Lab.

California launched its Earned Income Tax Credit in 2015, providing a state-funded benefit similar to the federal Earned Income Tax Credit.

To qualify for the credit, one must be age 18 or over, earn less than $30,000 a year and have a Social Security Number or Individual Taxpayer Identification Number, which is used by undocumented immigrants. Depending on income and household size, the tax credit can be worth hundreds of dollars.

Single adults with no dependents and households who earned less than $5,000 a year were the least likely to claim the California Earned Income Tax Credit, according to the California Policy Lab study.

About 76% of eligible households that did not claim the tax credit were single adults without dependents. The average credit among that group was about $85.

Households with dependents were most likely to claim the credit. The average credit for those households was $500.

Hispanics enrolled in CalFresh accounted for 43% of those who did not claim the tax credit, despite being eligible.

In the report, researchers wrote that they did not know why the racial disparities existed but said the data raised questions that “deserve further explanation. “

Last year, amid the coronavirus pandemic, Gov. Gavin Newsom signed a budget deal that for the first itme extended eligibility to the California Earned Income Tax Credit to undocumented immigrants with Individual Taxpayer Identification Numbers. While the report focused on 2017 data, researchers aren’t certain whether more money will go unclaimed in 2020.

Policy Lab researchers concluded people are not claiming the credit because the tax-filing system may be too complex for some of them. Unrath said some households might not be able to afford in-person tax filing services known to charge additional fees to submit extra forms.

“It’s really important for policymakers to consider the importance of barriers to tax filing and how households who might not otherwise file a tax return might miss out on that really important assistance,” Unrath said. “This paper underscores how large that problem can be just in California.”

This story was originally published July 14, 2021 at 5:25 AM with the headline "Eligible Californians missing out on tax credits worth hundreds of dollars, report says."