Earned Income Tax Credit

Paper Summary:

The paper discusses how the earned income tax credit (EITC) program could contribute more significantly to the American economy. The paper first explains that a large percentage of eligible filers forego an opportunity to claim the EITC because of misunderstandings and complexity issues, while others will only file claims through professional tax preparers who receive most of the credit earnings. The paper calls for greater outreach and simplification that will result in more Americans filing claims and realizing the potential of the EITC.

Outline:
The Economic Benefit
Impediments to Full Economic Benefit
Outreach: Benefits and Shortcomings

From the Paper:

"Enacted in 1975, the federal earned income tax credit was the largest tax-relief effort ever directed at America's lower-income demographic. The EITC, which is targeted at individuals and families to help them offset rising living expenses, can wipe out a filer's tax liability, and often result in a refund -- even if the filer paid no taxes during the year ("It's easier than ever," No date). Throughout its 30 years of existence, the EITC has been credited with helping raise millions of Americans out of poverty, and has contributed hundreds of billions of dollars to the American economy. While the economic impact of the EITC has been mostly positive, there are still several impediments that are preventing its full value from being realized. Each year, millions of potential filers do not claim the EITC because they are under-educated on how it works or because the process is too complicated."

Sample of Sources Used:

• Bell, K. (2008). "Earned income tax credit could pay off." Bankrate.com Web site. Retrieved May 4, 2008 from http://www.bankrate.com/brm/itax/tips/20010130a.asp.
• Bentley, T. (2006). "Nip and tuck." New York Times, Oct. 22. Retrieved May 4, 2008 from http://www.nytimes.com/2006/10/22/books/review/Bentley.t.html?ex=1319169600&en=61b5654d2a59be03&ei=5088&partner=rssnyt&emc=rss.
• Cameron, A. (2006). "North Carolinians lost up to $200 million in unclaimed tax benefits." North Carolina Justice Center Web site. Retrieved May 3, 2008 from http://www.ncjustice.org/assets/library/609_btctaxbrief1232006fedeitc.pdf.
• "Earned income tax credit program effectiveness and program management" (2003). Internal Revenue Service Web site. Retrieved May 4, 2008 from http://www.irs.gov/individuals/article/0,,id=96406,00.html.
• "Earned income tax credit statistics" (2007). Internal Revenue Service Web site. Retrieved May 4, 2008 from http://www.irs.gov/individuals/article/0,,id=177571,00.html.

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