There’s been a lot of discussion in Congress recently about family tax credits, particularly the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Notably, the US House of Representatives passed bipartisan legislation aimed at expanding the CTC. This proposal is poised to benefit 16 million children from low-income families and, in its first year, could lift 400,000 children above the poverty line.
Considering that the poverty rate for children under 18 is 16.3%, this expansion could have a profound impact on some of our nation’s most vulnerable individuals.
Earned Income Tax Credit (EITC) and the Child Tax Credit
While the expansion of the CTC is currently stalled in the Senate, the conversation is far from over. At Intuit, we are strong advocates for continued dialogue surrounding benefits like the CTC and EITC. These credits have proven to be some of the most effective tools for lifting low-income workers and their families out of poverty. Our commitment is twofold:
- Streamlining the application process to make it easier for families to claim these credits.
- Providing clear, accessible information to guide eligible families through the process.
- Educating families on their eligibility for these benefits.
- Promoting the availability of these credits through various outreach programs.
By focusing on these areas, we aim to ensure that more families can take advantage of the financial support available to them. The expansion of the CTC has the potential to significantly reduce child poverty, and we believe that through continued efforts and discussions, we can make this a reality.
Tax complexity is a significant barrier that prevents individuals, the self-employed, small businesses, and especially lower-income workers from fully benefiting from their well-deserved tax benefits. One prime example is the Earned Income Tax Credit (EITC). For a family with three children, this year’s EITC can be as much as $7,430 in refundable credit. However, according to the IRS, one out of five qualifying families miss out on this crucial credit.
Why Do So Many Miss Out on the EITC?
There are several reasons why many eligible families fail to claim the EITC:
- Lack of Knowledge: Many are simply unaware of the benefit and its eligibility requirements.
- Complex Requirements: The criteria for qualifying can be confusing and difficult to navigate.
- Errors in Claims: The IRS estimates that about 50% of EITC claims contain errors, which can lead to disqualification.
Higher Audit Rates for Low-Income Earners
Another critical issue is that the audit rates for low-income wage-earners who claim the EITC are five and a half times higher than those for other taxpayers. This increased scrutiny can further discourage eligible individuals from claiming the credit they deserve.
How Intuit TurboTax Can Help
Intuit TurboTax is committed to helping our customers navigate the complexities of tax credits, ensuring they receive the maximum refund guaranteed. However, we believe that more can and should be done to assist everyday Americans in understanding and claiming their tax benefits.
It’s essential to spread awareness and provide better resources so that everyone, especially those in lower-income brackets, can maximize their tax benefits and secure their financial well-being.
The United States’ tax code is notorious for its complexity, a byproduct of decades of legislative changes and additions by Congress. Over the past 30 years, this tax code has tripled in length and, according to Intuit, has become infinitely more difficult to comprehend. While we don’t write the tax code—that’s Congress’s job—we firmly believe that every taxpayer deserves a tax code that’s easy to understand. A great starting point is simplifying family tax credits.
The Need for Simpler Family Tax Credits
The Niskanen Center, a think tank based in Washington D.C. dedicated to advancing prosperity and opportunity, recently released an insightful paper titled, “Building a Stronger Foundation for American Families: Options for Child Tax Credit Reform.” This paper delves into the history of the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), offering valuable suggestions on how to improve family tax credits.