Earned Income Tax Program Goes Unused by Many in Need

When Petra Janzer arrived at the free tax workshop, her 10-year-old car was breaking down, the tires were worn through and she had never heard of the earned income tax credit.

The $1,307 check she received last year paid for new tires and repairs, and the 56-year-old grandmother from Huron could again rely on her car to get her to her job as a child-care provider 25 miles away.

But the EITC, a federal program that can boost a low-income family’s tax credit by thousands of dollars, is not reaching some of the neediest households -- especially in rural Latino communities.

Only 36% of the eligible Latino households surveyed in California’s San Joaquin Valley received the EITC they were entitled to last year -- even though the credit can provide up to $4,000 for households headed by the working poor.

The disparity was evident in the partial results of the Rural Families Speak Project -- a five-year survey, ended in September, by universities around the country of the financial well-being of rural families.

Volunteers helping taxpayers in isolated rural communities said their clients’ inability to access agencies that could tell them about the credit, along with language differences and cultural assumptions, often kept Latinos from receiving the credit.

The large number of undocumented immigrants in the Latino population does not account for this difference, since the credit applies only to legal, working residents with income less than twice the poverty level and at least one child living at home.

The Internal Revenue Service, recognizing the need for outreach, has trained 14,000 volunteers in the last three years to fill out the basic tax form and check for EITC eligibility. The effort has paid off. Last year, 20.9 million families received the credit -- up from 16 million the year before.

Government auditors consider the EITC program at high risk for fraud, however, so this year the IRS is asking some applicants for extra documentation proving they qualify. About 25,000 letters sent out in December asked families to prove their children lived with them more than half the year.

Margarita Rocha, executive director of Centro La Familia, an advocacy organization that provides free tax help, said the letters have intimidated some recipients.

“The literacy level of our clients sometimes is not high, or they haven’t been here that long,” Rocha said.

EITC is often considered the most successful federal anti-poverty program. More eligible families receive the EITC than traditional assistance programs such as Medicaid or food stamps. In the last tax year, it gave $36.9 billion back to qualifying families.

Proponents say one of its advantages is the way it rewards only those who work. The amount each eligible taxpayer gets is equal to a percentage of income. If the earned income tax credit exceeds the taxpayer’s liability, the Internal Revenue Service will refund the difference.

“These are really their dollars, not a handout,” said Karen Varcoe, the UC Riverside consumer economics specialist who led the California research published in the January-March issue of California Agriculture magazine.

For Janzer, the EITC she never knew about before Centro La Familia’s tax workshop last year means that she has extra money to help care for her granddaughter. Now, it’s tax time again and she’s back, W-2 in hand, hoping the credit will keep her car rolling for another year.

Janzer qualified because she makes less than $24,980 a year -- double the $12,490 level that marks the official beginning of poverty for a family of two.

In the Latino households surveyed by Varcoe and others in Kern and Madera counties, where unemployment is high and many workers depend on seasonal agricultural jobs, the average family income was $19,920 a year, just under the poverty line for a family of five. But only a third of the eligible families filed for the EITC.

“Some even have an idea that they can get money back, but they don’t know how, or if they qualify,” said Wilfredo Rodriguez, who works at Centro La Familia.

Knowing who is eligible is not always simple in a community where families often include citizens, undocumented immigrants and people in the process of legalizing their status. Fear of the federal government is also common.

“The IRS to them is the federales, the people who come after them,” Varcoe said. But researchers found that a little information about EITC goes a long way. “We’re convinced that if people have information they’ll act on it,” Varcoe said.