Today is the 11th annual “Earned Income Tax Credit Awareness Day” — an important date at MEDA, where most of our historically underresourced tax clients qualify for this credit that lets them keep more of their annual income so they can better afford basic necessities.
In the 2016 calendar year, there were 4,518 tax returns prepared for free by MEDA, with $6.1 million returned to the low-income community. A big reason for this impact was the EITC.
“Earned Income Tax Credit Awareness Day” was started by the IRS as a one-day grassroots campaign — via community-based organizations, city officials and social media — to spread the word far and wide to ensure that everyone who is eligible for this credit knows that it exists. That is currently true of only 80 percent of those eligible.
That’s why a key IRS message is: “You work hard. So see if the EITC can work as hard as you.”
Federal EITC
MEDA’s free tax team also works hard, making sure the federal EITC continues to generate much-needed refunds in the mostly immigrant Latino community served at its four VITA sites in San Francisco.
Ponder this fact: For the 2015 tax year, 3 million Californians received the EITC, for $7.3 billion. The IRS reported an average EITC credit of $2,409 in the state.
The EITC fosters community development in low-income communities like San Francisco’s Mission. A Mission Promise Neighborhood survey last spring revealed that 90 percent of respondents made under $50K per year — well below the San Francisco median household income of over $84K. This translates to most of our families qualifying for the federal EITC.
The maximum amount of the federal EITC this year is:
- $6,269 (three or more qualifying children; maximum income $47,955* or $53,505**)
- $5,572 (two qualifying children; maximum income $44,648* or $50,198**)
- $3,373 (one qualifying child; maximum income $39,296* or $44,846**)
- $506 (no qualifying children; maximum income $14,880* or $20,430**)
*single, head of household or widowed
**married filing jointly
These amounts can equal a large percentage of a family annual income.
State EITC
The Golden State started Cal EITC starting with the 2015 filing year. It quickly showcased impact as a supplement to the IRS’ program.
California is not alone: 26 states and the District of Columbia now have their own EITC. These credits are available solely to families that earn income from work.
Tax Program Manager Max Moy-Borgen explains, “MEDA’s working families, and their children, have definitely benefited from the new state EITC. We hope in years to come the maximum income levels for eligibility get increased,, as they are much lower than the federal levels. Our state is an expensive place in which to live, so we would like to see more of our families qualify for Cal EITC.”
The maximum amount of the Cal EITC this year is:
- $2,653 (three or more qualifying children; maximum income $13,870)
- $2,358 (two qualifying children; maximum income $13,870)
- $1,428 (one qualifying child; maximum income $9.880)
- $214 (no qualifying children; maximum income $6,580)
San Francisco’s EITC
San Francisco offers a one-time Working Families Credit, whereby qualifying low-income families can earn an additional credit of $100 (if paid via a paper check) or $250 (if paid by direct deposit). The disparity in amount received is because the program was designed to encourage families to avoid check-cashing fees by opening bank accounts, which MEDA can do for clients who do not have one.
This City program is rare — one of just a handful across the nation. The Working Families Credit is a means to alert financially challenged San Franciscans to the various benefits for which they may be eligible, such as food assistance or health coverage.
The gaps
While the EITC is undeniably a game changer, Moy-Borgen also sees the gaps for many low-income families. That’s why he hopes for expansion of all EITC programs.
Cash-income only clients have issues with regards to the Cal EITC only; furthermore; most of the credit usually goes to reduce the client’s self-employment tax burden. For the San Francisco Working Families Credit, you do not qualify without at least one eligible dependent child on your federal income tax return. This combination makes it difficult for some low-income, single clients without dependents to make ends meet, as the income limit and credit amount is significantly reduced without children.
Regardless of their situation, Moy-Borgen’s team is well versed in all IRS situations that pertain to the low-income community.
“The team looks forward to helping working families get their maximum refund this year,” concludes Moy-Borgen.
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Ready to get your EITC tax credits? To make your appointment for free tax preparation in San Francisco, call 2-1-1 (available 24/7 in 150 languages).
Special thanks to the City and County of San Francisco-Human Services Agency, United Way of the Bay Area and Bank of the West for helping low-income residents do their taxes at no cost.
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