However, it is estimated that annually, Hawai`i workers fail to claim between $31,299,580 and $41,732,301 in EITC benefits. Therefore, every year, local businesses are losing out on millions of dollars in income and the State is losing out on millions of dollars in revenue that would be generated by the excise tax.
Researchers have credited the EITC with raising labor force participation levels and helping families transition from welfare to work. For some workers, the EITC can represent a 30 to 40 percent increase in income and since the EITC is only available to those with EARNED income (workers), the EITC has proven to be an incentive for people to become employed and stay employed, thereby reducing their reliance on public welfare assistance.
The EITC reduces poverty. According to the Center on Budget and Policy Priorities and the IRS, the EITC lifts approximately 4.4 million people, including 2.4 million children, out of poverty each year. Census data establishes that the EITC lifts more children out of poverty than any single program or category of programs.
By reducing poverty, the EITC eases the financial difficulties encountered by the working poor and plays an important role in the stabilization of marriages and families.
Paid preparers also extensively market Refund Anticipation Loans (RALs) to low-income taxpayers. RALs allow taxpayers who are expecting refunds to obtain their money quickly — but at a high price. Annualized interest rates on RALs have been estimated to range anywhere between 50 percent and 1300 percent. According to the National Taxpayer Advocate, 56 percent of RAL consumers also claim the EITC. In other words, the majority of RALs are being obtained by those who can least afford them. At the national level, the Brookings Institution found that an estimated $1.9 billion intended to assist low-income families via the EITC was received by commercial tax preparers and affiliated national banks to pay for tax assistance, electronic filing of returns, and high-cost refund anticipation loans in 2002.
Free tax assistance sites help taxpayers access and claim the tax credits to which they are entitled AND receive the full benefit of their refunds since there is no reduction of those refunds resulting from fees of any kind. Free tax assistance sites also help these taxpayers avoid predatory lending practices such as RALs.
Free tax assistance sites have also begun to serve as conduits to other services such as vocational training and financial literacy workshops.
Basic eligibility requirements:
You need to have earned income (whether you work for someone else or have your own business)
You need a valid social security number allowing you to work
If you are married, you must file jointly with your spouse.
You must be a U.S. citizen or resident alien for the entire tax year and you must have lived in the US more than half of the year.
Any investment income must be $3,200 or less.
You cannot be a dependent or qualifying child of another person.
If you have a child, the child must qualify by meeting relationship, age, and residency tests.
A qualifying child cannot be used by more than one person to claim the EITC
and you earn LESS than:
then you may qualify for a credit or refund UP to:
|a married couple w/ 3 or more
|Unmarried w/ 3 or more
|A married couple w/ 2 or more
|Unmarried w/ 2 or more
|A married couple w/ 1 qualifying
|Unmarried w/ 1 qualifying
|A married couple w/no qualifying children||$19,190||$475|
|Unmarried w/ no qualifying
Note: Investment income must be $3,200 or less to qualify for the EITC.
Other credits available: Child and Dependent Care Expenses Credit, Credit for the Elderly or Disabled; Retirement Savings Contribution Credit, Credit For First-Time Homebuyers, American Opportunity Credit (new education benefit), increased Transportation Subsidy, Up to $2400 of tax-free Unemployment Benefits, Enery Efficiency and Renewable Energy Incentives, Health Coverage Tax Credit (limited to certain types of taxpayers).
Copies of previous year’s federal and state tax returns if available
Any tax booklets or forms they might have received from the IRS or State
Photo ID for taxpayer and spouse (if applicable)
ORIGINAL Social Security cards for the filer, the spouse, and all children being claimed.
Dates of birth for all of the above individuals.
Proof of wage and earnings (such as W-2′s, 1099′s, etc)
Any other information about income and expenses (Social Security benefits, day care expenses, tuition expenses, unemployment compensation, worker’s compensation benefits, disability benefits)
All information relating to any new vehicles or homes that they purchased during 2009. If they are already a homeowner and an owner-occupant, they should bring with them proof of real estate taxes that they paid during 2009.
If they are self-employed and have less than $5,000 in expenses, they must bring all evidence relating to income earned, expenses paid, and general excise taxes or estimated taxes paid. Receipts and expenses must be sorted out. We cannot sort them out for the taxpayer.
Any interest and dividend statements from banks
Total amount of rent paid during the year and landlord’s name and tax ID# (in the event that the person is eligible for the low income renter’s credit)
Total amount paid for day care and the day care providers’ tax identification number (which is the individuals’ social security number or the business’ employer identification number)
Bank information if they want a direct deposit of any refund into their account.