With the help of the free federal tax service network, local taxpayers this year pocketed more than $6.4 million in refunds from just claiming the Earned Income Tax Credit.
And many more who are eligible did not even apply, depriving individuals, families and ultimately the community of available money.
"Nationwide last year, over 26 million people received nearly $59 billion in EITC," said Dianne M. Besunder, an IRS spokeswoman. "EITC lifted an estimated 6.6 million people out of poverty, including 3.3 million children."
The EITC is a refundable credit for low-income working individuals and families. The maximum credit this year was $5,666 for a taxpayer with three or more qualifying children and income below $43,352.
"The Earned Income Tax Credit was enacted by Congress in 1975, and is one of the largest federal antipoverty programs, providing help to workers who don't earn a high income and who meet certain eligibility requirements," Besunder said. The tax break greatly benefits workers who make very little money and those whose earnings were dramatically stunted due to layoffs during the year.
"Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund," Besunder said. And people do not have to have children to be eligible.
The IRS' Volunteer Income Tax Assistance program provides free tax service so eligible taxpayers can claim the credit without the financial hinderance of paying a preparer. Erie County's VITA sites prepared 14,000 returns that culled $5.8 million in EITC and $19 million in total refunds. In the Niagara County, the VITA sites prepared 3,300 returns that yielded $645,000 from claiming the EITC and more than $2.8 in overall.
While the VITA program has dozens of locations in Erie and Niagara counties, returns prepared at eight sites in Buffalo accounted for the bulk of their EITC refunds. The Creating Assets, Savings & Hope sites culled $5.1 million of the $6.4 million total.
"Our sites are dedicated to serving and reaching more people who are eligible for the EITC," said Katie Lyons, director of CASH, a United Way of Buffalo and Erie County financial literacy program for low- to moderate-income families. "We have longer hours, we open after-hours, open on the weekends, so we get more clients." Also, three of its sites are located in the city's zip codes with the highest rates of poverty.
CASH partners with Buffalo Federation of Neighborhood Centers to coordinate sites and volunteers. They embark on a campaign blitz each year to spread the word about the EITC, which includes reaching out to schools, community centers, presentations and distributing flyers. And their efforts appear to be effective in increasing awareness.
In 2010, EITC refunds for the two counties totaled almost $6.1 million -- $593,000 in Niagara and $5.5 million in Erie, with the CASH sites accounting for $4.7 million. For tax year 2009, 1.6 million New York taxpayers claimed the EITC credit and received a total of $3.52 billion.
But Besunder said 20 percent to 25 percent of eligible taxpayers don't claim the credit. Grandparents raising grandchildren and taxpayers not fluent in English are among the taxpayers who commonly don't take advantage of the credit. The recently divorced and unemployed are also tend to be unaware of their eligibility.
Also, self-employed workers and those who don't earn enough to meet the filing requirement, like rural workers, farmers and people with disabilities, could also be eligible but often don't take the credit.
"A lot of our effort is trying to increase awareness around the EITC," Lyons said. "There's this misunderstanding that if a person doesn't have tax liability, they can't get the credit. But they could be leaving money they worked for and are entitled to on the table."
The belief that qualifying children is a requirement for the credit is another misconception. While household sizes and their number of qualifying children do determine the amount of the credit, the maximum EITC for a single taxpayer with no qualifying children and an income below $13,460 was $457 for 2010 tax year.
If someone is eligible for the EITC but have not claimed it, they can file an amended return, Form 1040X. Amendments are permitted up to the past 3 years.
"If you determine you are eligible you may be entitle to get a nice refund for each of the years," Besunder said.
Also, New York requires filing a state amended return (Forms IT 150X or IT 201X) within 90 days of an amended federal return. If you do qualify for the EITC, you're automatically entitled to a state earned income credit refund, which is calculated based on the federal credit.