EDITOR'S NOTE: Since this article went to press, in-person VITA sites, free tax preparation sites, and tax filing events have been closed or canceled due to COVID-19. For low-income families, access to accurate information and free online tax preparation services is more critical than ever to ensure that eligible households receive stimulus payments as well as the Earned Income Tax Credit.
"People in the EITC participation gap do not file their taxes because they can't find trustworthy, affordable help." (1)
The Earned Income Tax Credit (EITC) is often the largest cash payment low-income households receive, lifting millions out of poverty every year. (2) EITC, coupled with financial management skills and asset building from increased earnings, is key to helping families build positive, long-term economic mobility. Unfortunately, there are still millions of families missing out. Last year, 20 percent of eligible households did not file their taxes, leaving $10.5 billion in unclaimed EITC (roughly $1,336 per household) on the table. (3) And what's more, this participation gap persists year after year.
Many reasons have been cited for the persistence of this gap, among them low awareness and informational complexity. Emerging research finds that simply increasing awareness is not sufficient for increasing EITC participation. (4) Awareness campaigns must be trustworthy and accompanied by better services. Technological solutions present an opportunity to help make it easier for eligible households to learn about and file for EITC. That's why Fresh EBT (www.freshebt.com) is partnering with state and national programs to spread the word about EITC and free tax preparation services.
Fresh EBT: Partnering to Improve the Information Landscape
At Propel, we believe that technology can and should be used to help close the EITC participation gap. Low-income households are bombarded with enormous amounts of information--some good, some bad, some downright predatory--when it comes to accessing tax refunds to which they are entitled. In fact, even when eligible households do file for EITC, they can still end up paying for services that should be free. For example, a recent audit by the Treasury Inspector General for Tax Administration found that the online IRS Free File Program was intentionally hidden by tax service partners in order to encourage households eligible for the program to pay for services. This resulted in 14 million eligible households...