More Californians can now claim the Earned Income Tax Credit. Here’s who could benefit most
This story is part of the Central Valley News Collaborative — a bilingual, community journalism project funded by the Central Valley Community Foundation and with technology and training support from Microsoft Corp. The collaboration includes The Fresno Bee, Valley Public Radio, Vida en el Valle, Radio Bilingüe and the Institute for Media & Public Trust at Fresno State.
As inflation hits an all-time high and daily expenses such as gas and food costs surge, a tax refund could provide a big financial boost for many of the Central Valley’s low-income families who live paycheck-to-paycheck. A state tax credit, which was recently expanded to undocumented workers, could help provide some relief.
The California Earned Income Tax Credit was designed to give a tax break to low- and moderate-income tax filers to help prevent and lift them out of poverty. It’s especially critical now, since many families have struggled financially during the pandemic. But until recently, the credit was only available to legally authorized workers with a Social Security number, excluding the state’s more than 2 million undocumented residents.
“Many undocumented people have had to pay taxes, so they’ve been contributing to the economy, but they were not getting anything back,” said Clarissa Vivian Petrucci, a special project coordinator with the Central Valley Immigrant Integration Collaborative, an immigrant rights organization. “This credit is very important for our community, especially here in the Valley, because we have many people — especially farmworkers — who work hard but are still living in poverty.”
For years, undocumented residents who filed their taxes with an Individual Taxpayer Identification Number, or ITIN, were denied access to this tax refund due to their immigration status. The Internal Revenue Service issues an ITIN to tax filers who are not eligible to receive a Social Security number, including undocumented immigrants, foreign nationals and some visa holders.
That changed in 2020 when Gov. Gavin Newsom signed AB 1876, which expanded the tax credit to include all income-eligible immigrants in an effort to help more Californians with the cost of food, rent and other basic necessities. California is now the second state, following Colorado, to expand the credit to undocumented immigrants.
But many workers don’t know they’re eligible and are leaving a lot of money on the table. It’s a problem that prevents hundreds of thousands of families — especially Latinos — from receiving much-needed funds that they’re entitled to, said Eduardo Garcia, senior policy manager at the Latino Community Foundation, an advocacy organization that has been conducting education and outreach about the tax credit.
“We are working to provide education to members of the Latino community to claim these dollars because this is one essential credit that can provide a necessary boost for them,” he said. “All families should have equal access to this tax credit so that they can weather these difficult economic times.”
About $76 million in tax credits are unclaimed by eligible tax filers each year and Latinos make up about half of those not claiming these dollars, according to a July 2021 report from the California Policy Lab at UC Berkeley. The researchers analyzed how many eligible residents were receiving the credit based on the pool of people already enrolled in CalFresh, the state’s food stamp program. Of those 948,207 CalFresh recipients who were eligible for the credit, about 53% claimed the credit, the report showed.
Undocumented immigrants can apply for California tax credit
The Earned Income Tax Credit works by reducing the amount of taxes a tax filer owes or increasing a tax refund. If a filer’s tax credit amount is more than what they owe in taxes, they can receive the money back in their tax refund. Those who are eligible for the credit can still receive a refund even if they do not owe income tax.
To qualify, a worker must be at least 18 years old, have a maximum earned income of $30,000 if single and have a Social Security number or an ITIN for themselves, spouse and child. In addition, a worker must also live in the state for more than six months, among other requirements.
The amount of money a tax filer receives depends on income and family size, but can range from hundreds to thousands of dollars. A worker making less than $30,000 can receive up to $255, while those with children or dependents can receive more. A tax filer with one child, for example, can receive up to $1,698.
An individual who has children born in the U.S. has an additional incentive to apply for the program. If their child has a Social Security number, a tax filer could receive up to $3,600 per child for children under age 6 and $3,000 for children between the ages of 6 and 17, according to the California Franchise Tax Board, the state agency that administers the credit.
Some workers with children could also receive an additional tax credit, said Petrucci with the Central Valley Immigrant Integration Collaborative. Workers who qualify for the state Earned Income Tax Credit and have a child under the age of 6 could get up to $1,000 through the Young Child Tax Credit. U.S. Citizenship and Immigration Services does not consider these tax credits as public benefits, she added.
Octavio Aguierre is a Fresno resident and immigrant from Michoacan, Mexico who has lived in California for 34 years. Aguierre owns a small food truck where he sells specialty adobada and carne asada tacos, burritos, quesadillas and other regional dishes.
The pandemic was especially difficult for him and his family, he said. Aguierre, who is the family’s main provider, contracted COVID-19 this past August and had to stop working. He lost 20 pounds after experiencing severe, debilitating symptoms, including trouble breathing, fever, and shortness of breath, which left him bedridden for a month and a half.
“I honestly thought I was going to die but thank God I’m alive,” he said in Spanish. “I got very, very sick. Getting the virus changed me, I’m no longer the same person.”
Because he’s undocumented, he didn’t qualify for many social safety net programs that kept many Americans afloat during the pandemic, including unemployment insurance, stimulus checks or other federal benefits.
Since he resumed working, Aguierre said inflation has taken a toll on his small business. Several costs for ingredients and packaging items such as paper, takeout boxes and disposable utensils have drastically increased.
He supports the state’s expansion of the Earned Income Tax Credit, which he plans on applying for this year for the first time when filing his taxes. He said the credit could help him recover financially while he works to get his business back on track.
“This could be a huge help to us,” he said. “Things have been tough lately but we’re just trying to keep pushing forward and doing our best to get through this time.”
How to apply for California tax credit
Sasha Feldstein, the director of economic policy at the California Immigrant Policy Center, an advocacy organization that pushed for the expansion of the Earned Income Tax Credit, said there are several barriers that still prevent many undocumented residents from claiming their tax credits.
Some undocumented workers still do not have an ITIN, which is required to claim the credit. In addition, navigating the tax filing process can be challenging for first-time filers. Many paid tax preparers also charge high rates for their services, which could “outweigh the benefits of the credits” an individual is entitled to receive, she said.
“It’s a huge problem that we need to eventually address,” she said. “We really want to encourage people to file their taxes for free if they’re able to. It’s also really important that people know where to access resources to get help with getting an ITIN in the first place.”
The deadline to file a tax credit with a tax return is April 18. Still, many qualifying workers can retroactively apply to receive the credit from previous years. A filer can claim the tax credit from up to four years by filing or amending a state income tax return.
Eligible workers interested in applying for the tax credit can download the California Earned Income Tax Credit form here, at the California Franchise Tax Board website. It must be completed and included when filing a tax return. Instructions on how to submit the form with a tax return can be found here.
There are different ways a resident can submit and seek help on how to file a tax return. California residents can file their tax return and claim the state tax credit using CalFile for free. Those who qualify for the credit can seek free tax preparation resources at the state’s Franchise Tax Board website here. More information on how to file taxes for free can be found on the United Ways of California website here.
To learn more about the California Young Child Tax Credit, go to the state website here. For more resources on how to file a tax return and claim a credit, text EITC to 855-620-2180.
This story was originally published March 23, 2022 at 5:00 AM.