Earned Income Tax Credit Outreach Pays Off for Rural America

$24 billion is a great deal of asset-building change. That’s the annual dollar value of Earned Income Tax Credit (EITC) claims for working families in rural America*. EITC is one of those critical poverty-fighting tax benefits that rewards work for low- and moderate-income working people. At lower incomes, the more a family earns, the more tax credit the family receives.  When an individual’s or family’s earned tax credit exceeds the amount of taxes they owe, it results in a cash tax refund. This year, a family with two children could receive a tax credit of up to $5,460.

Find out where tax filers are more likely to claim EITC.

EITC makes a huge difference for families. A study by the Tax Policy Center concluded that the earned credit “lifted 6.5 million people out of poverty, including 3 million children”. But its benefits don’t stop there. If you include the economic effects of how those dollars are used—paying off bills and loans, buying or fixing cars, purchasing food and toys, establishing savings—the annual value of the credit to just rural communities might be as high as $36 billion**. That’s why the RuFES Framework includes Keep It Goals 5 and 6: “families file tax returns annually” and “families secure all tax benefits for which they qualify, starting with those that reward work.”

EITC and rural communities

This month, as millions of families across the United States are filing for the credit, the RuFES network is digging a little deeper into the data from 2012 (the most recent data available) to learn what EITC means for working families and rural communities:

• Nationally, 26 million households claimed tax credits worth $62 billion according to 2012 IRS tax data. About 20% of all households requested the credit, and the average credit for both urban and rural communities was $2,359.
• Of those applicants, 40% were rural and mixed-rural working families, who together claimed credits totaling $24 billion.
• In the most rural places (counties with the lowest population density), 22% of households claimed credit totaling $6.2 billion.
• In the poorest rural counties (counties with 30% child poverty or higher, home to 1.7 million*** children living in poverty), 32% of households claimed the credit, totaling $6.0 billion.

The success of the EITC is due in large part to the hard work of practitioners like you who care about helping rural families get ahead and stay there. Since families can’t access the credit without filing an annual tax return, community-based efforts to get low- and moderate-income families to complete their returns—even if they haven’t earned enough to file a tax return—are a tremendous help in getting families to claim their hard-earned.

Click here to find out how much EITC generates for rural communities in your state.

Claiming billions more for rural places

Despite this remarkable work, many rural families still are not receiving the dollars they’ve earned. According to the IRS, 20% of all eligible applicants do not receive the tax credit they’ve earned because they fail to file a tax return or they file incorrectly. Rural tax payers are leaving billions of dollars, maybe as much as $6 billion, on the table, meaning their families and their communities don’t benefit. That’s why the outreach and volunteer work of so many community groups and nonprofits is important and rewarding.

Many organizations conduct outreach every year, and it might feel routine – but it is a big deal! Let’s make it an even better deal for working families. Here are the RuFES Action Network recommended resources for designing great EITC and Child Tax Credit outreach campaigns in your community:

• Center on Budget and Policy Priorities just published a fantastic 2015 guide book on designing an outreach campaign – including a great list of strategies. Access their kit here.
• Every year, the income limits and maximum EITC credit change. To find out what’s new in 2015, checkout the IRS portal on EITC.
• EITC outreach can be combined with Child Tax Credit outreach to have the greatest impact. Learn more about the Child Tax Credit.
• Looking for ideas for rural communities? We suggest watching our past webinar, which includes effective rural outreach strategies.

This RuFES Action Network Alert was researched and written by Jason Gray and Travis Green. 2012 IRS EITC tax data was provided by (*) The Brookings Institution. (**) The Brookings Institution presented EITC multipliers in this presentation. Data on children in poverty comes from the (***) Census Bureau’s 2008-2012 American Community Survey County Estimates.