California has a tax credit that many are missing out on. Here’s what you can do to collect it
It’s about time to start gathering documents to file your tax returns. For many, that also means making space in your wallet for extra cash.
But some of the poorest residents in California may be losing out on free money altogether.
That’s because they are not filing taxes and therefore not collecting Earned Income Tax Credit refunds, according to a new study.
The California Policy Lab released a report this week outlining the results of a two-year study where government agencies and a nonprofit reached out to more than one million low-income residents about how and where to file tax returns. The report stated that the effort was unsuccessful in getting residents to file returns.
According to the report, residents were not persuaded into filing their tax returns, even after getting direct text messages and letters with information.
The nonprofit and government agencies reached out to low-income residents who used public benefits or did not file tax returns in the previous three years.
The tax credit amount a resident gets depends on income and family size, according to the state Franchise Tax Board. Filers must be over 18 and have state work history and must have earned $30,000 or less in a year to qualify for a tax credit. This year, low-income tax filers can earn a child tax credit of up to $1,000 for children under the age of 6.
The tax credits are aimed at helping poor families achieve economic mobility, according to state officials. They say the extra cash can go a long way for families struggling to get by.
Nationally, the tax credits, paired with rising minimum wages in states like California, is considered an effective method of reducing poverty, especially among single parents who work, according to a joint study from the Economic Policy Institute and Research on Labor and Employment at the UC Berkeley.
But researchers believe the reason many low-income Californians do not file their taxes is due to a daunting filing process, which includes gathering paperwork and finding time to file.
“One of the key differences is that claiming the credits means filing taxes, something many low-income people wouldn’t otherwise have to do,” said Elizabeth Linos, public policy professor at UC Berkeley and co-author of the report. “Those challenges may be pushing away the very people these credits are supposed to help.”
According to the policy lab, the outreach was an attempt to evaluate outreach efforts meant to increase tax filing and tax credit refund collection. The researchers now plan to study how much money is left on the table by residents who don’t claim it.
Local push
There are efforts at the local level in the state to encourage more low-income residents to file their taxes.
More than 7,200 tax returns were filed last year through workshops held by the United Way of Fresno-Madera, according to Ashley Ruiz, program manager.
Ruiz said of those who filed tax returns, 1,900 filers qualified for the state income tax credit. In all, about $11.5 million in refunds were issued among those who attended United Way workshops, which are free to the public.
Although United Way’s effort typically reaches about 100,000 residents in Fresno and Madera counties, Ruiz said she believes there are more residents who can benefit from outreach — and tax credits.
According to the state tax board, households with less than $30,000 and three children or more can earn up to $2,982 in state tax credit and $6,557 in federal tax credit.
Ruiz said that even if residents may not know whether they qualify, it doesn’t hurt to check. Tax credits are expected to double this year after changes approved by legislators. State legislators have also debated whether to allow undocumented immigrants to tap into the tax credits, which the governor has not yet agreed to.
Free tax help
Starting Jan. 31, Fresno State will open a free tax-filing site and a second site will open Feb. 1 at the United Way office. Both are operated by the organization.
Residents can also dial 211 to find a nearby tax filing location. Tax help information is also available on United Way’s website, www.uwfm.org.
More information on how to file state taxes is available on the state website, www.ftb.ca.gov/file.
The Fresno County Library also offers free computer stations so residents can file their state or federal taxes. The library can be reached at 559-600-7323.
This article is part of The California Divide, a collaboration among newsrooms examining income inequity and economic survival in California.
This story was originally published January 23, 2020 at 3:24 PM.
