Publications
The Southern Regional Initiative to Improve
Access to Benefits for Low Income Families With Children
Chapter 6
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is administered by the Internal
Revenue Service and was established to supplement the incomes of families
making low wages. The EITC can provide substantial assistance to poor
and low income working families. In 1997, a family with one child
can earn up to $25,760 and receive the EITC and families with two
or more children can earn up to $29,290 and receive the EITC. The
amount of EITC assistance received by families is based on a sliding
scale. In 1997, a one-child family earning at the minimum wage can
receive $2,210 in EITC cash and a two-child family earning the minimum
wage can receive $3,656.
There are two ways a family can get the cash provided through the
EITC. They can receive it at the end of the year when they file their
tax return or they can get part of the EITC in advance with each paycheck
and the rest when they file their tax return. A family must file a
federal tax return to receive the EITC.
The EITC cash can help families pay for health coverage, child care,
transportation or other needs. Getting the word out about the EITC
should be a major goal for public and private organizations attempting
to assist low income working families.
Outreach
Focus groups conducted by the Southern Institute in nine counties
in GEORGIA and NORTH CAROLINA indicated the need for
welfare agencies to educate families about the availability of the
EITC. In GEORGIA, 41% of the EITC questions asked on the pretest
were answered incorrectly by welfare and Transitional Medicaid families
who participated in the focus groups. In NORTH CAROLINA, 38%
of the EITC questions asked on the pretest were answered incorrectly.20 (See
Chapter 2 for a discussion of post-test results.)
Additionally, in both GEORGIA and NORTH CAROLINA, caseworkers
were not well informed on the EITC. The results of the site visits
during the current southern regional project indicated that the experience
in Georgia and North Carolina was not unusual. States expressed a
desire to learn more about the EITC and to share information about
it with families.
The information outreach brochures developed by the Southern Institute
provide states with a tool to educate both caseworkers and families
about the cash available through the EITC. The brochures specifically
state that caseworkers have copies of the Form W-5, which is the EITC
advance payment form to be filed with employers. This means that the
agency must have ample copies of the form and caseworkers must be
informed about the EITC. A caseworker in NORTH CAROLINA reported that
the information in the brochure “forced us to really start promoting
the EITC.”
Two states (MARYLAND and OKLAHOMA) and the DISTRICT
OF COLUMBIA reported that they had worked with the Center for
Budget and Policy Priorities to develop strategies to promote the
EITC.
Project Get Together in OKLAHOMA is an example of an EITC outreach program.
It is briefly described below.
Oklahoma
Project Get Together is a Tulsa anti-poverty
agency which offers a program to educate and
help low income families claim the EITC. The
program receives funding from the Charles and
Lynn Schusterman Family Foundation. Project
Get Together receives strong support from Governor
Frank Keating, including a special mailing
to 37,000 employers with a personal letter.
The project produces radio and TV public service
announcements and works with the print media
to promote the EITC. There is a toll free number
operating during the tax season staffed by
operators rather than answering machines. The
project links with IRS Volunteer Income Tax
Assistance (VITA) sites to provide assistance
with tax preparation and electronic filing
services at no cost.
Contact:
Steven Dow
Project Get Together
2020 S. Maplewood Street
Tulsa, OK 74112
918/835-2882
Asset Testing
The eligibility rules related to how the EITC cash is counted are
inconsistent and confusing to families applying for health and other
benefits.
With regard to income, federal law prohibits counting the EITC as
income for purposes of calculating eligibility or benefit amounts
for Medicaid, Supplemental Security Income (SSI), food stamps or housing.
Each state determines whether or not to count the EITC as income when
calculating TANF cash assistance benefits. No southern state reported
that the EITC was counted as income for TANF benefits.
With regard to assets, if a state imposes a Medicaid assets test
for children, federal law allows the EITC to be counted. Only two
southern states (ARKANSAS and TEXAS) count assets in determining
Medicaid eligibility for children. However, ARKANSAS specifically
excludes the EITC as an asset in determining Medicaid eligibility
for children. TEXAS counts the EITC as an asset for children
using the food stamp policy for EITC lump sum payments.
Counting the EITC as an asset impedes children’s access to Medicaid
and can also result in eligible children losing Medicaid coverage.
Additionally, counting the EITC against families whose children would
otherwise be eligible for Medicaid conflicts with state and federal
policies which promote work.
Actions Needed to Improve
Access to EITC and Actions Needed to Remove EITC Barriers to Medicaid
Eligibility
Actions that can be taken to improve access to the EITC and to assure
that EITC rules do not present barriers to Medicaid eligibility for
children are outlined below:
- To assure that families learn about the EITC,
states should conduct information outreach
campaigns, with special efforts targeted to
families on welfare, and provide EITC information
and forms to eligibility workers.
- To assure that children do not lose Medicaid
because their family claimed the EITC and did
not spend their refund quickly, states should
exclude the cash received through the EITC,
whether through the advance method or end of
year tax refund, from the state definition
of assets.
- To avoid children losing Medicaid coverage,
the federal government can enact the same policy
it has for income and thus disallow the counting
of EITC cash as an asset in determining Medicaid
eligibility.
____________________
20 Sarah C. Shuptrine
and Genny G. McKenzie, Information Outreach to Reduce Welfare Dependency:
A Georgia Welfare Reform Initiative, Phase 1 Report, prepared
for the Georgia Department of Human Resources, Division of Family
and Children Services (Columbia, SC: Southern Institute on Children
and Families, August 1996) p. 7; and Sarah C. Shuptrine and Genny
G. McKenzie, Information Outreach to Reduce Welfare Dependency:
A North Carolina Welfare Reform Initiative, Final Report (Columbia,
SC: Southern Institute on Children and Families, May 1996) p. 8.
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