This section covers tax topics important to low- and moderate-income people including tax credits, tax education and outreach, and free tax preparation.
Tax credits have a significant impact on the financial well-being of low- to moderate-income families. Federal and state tax credits, especially the federal Earned Income Tax Credit (EITC) and its Minnesota counterpart the Working Family Credit (WFC), help:
- lift millions of people, more than half of them children, above the poverty line;
- allow families to meet basic needs such as food, housing and utility bills;
- help families reduce debt, build savings and acquire assets;
- reward the effort of workers in low-wage jobs;
- encourage and support work participation;
- bring federal and state dollars to local economies; and,
- offset the disproportionate share of earnings that low-income families pay in other taxes, such as sales and payroll taxes.
How do families claim their tax benefits?
They have to file their federal and state tax returns, even if they do not earn enough money to be legally required to file. In fact, these are the families who are often the most likely to qualify for some of the benefits. Many eligible taxpayers fail to claim their earned income tax credits. Importantly, eligible taxpayers can file three years back for unclaimed tax credits. That means some families are eligible for thousands more dollars. Many low- to moderate-income families are eligible for free tax preparation services and e-filing. Using these services saves families hundreds of dollars in unnecessary fees.