THE NEW GILDED AGE (Part 2)
THE NEW GILDED AGE (Part 2)
15th January, 2009 0
Your household income can rise beyond $30,000, maybe even close to $40,000 and if you have a child in your home the federal tax code considers you to be low-income, or at least sort of low-income.
Guess what? You qualify for the federal Earned Income Credit. Even though you won't get as much of a break as somebody with a lower income, it's still real money and you will miss out if you don't know the details. Furthermore, you qualify to have your taxes prepared for free by a trained expert.
This is just one of many examples that can allow you to reap more cash from your tax return. You can learn, and gain, if you invest just a few hours with a pair of free tax services in Saginaw County.
First there is VITA, Volunteer Income Tax Assistance, operated through United Way of Saginaw County. Call 755-0505. Secondly, there is the Income Tax Preparation Program at the Saginaw County Community Action Committee, CAC. Call 753-7741.
For now, here is some other valuable tips to consider:
Billions of Dollars Not Received
For the most part, upper-income and wealthy people attain their maximum tax benefits (and 'then some). They know they have a great deal at stake, and so they take personal interest and/or employ tax preparation professionals.
Low and low-middle income people have the greatest needs for tax credits, but they are the most likely group to miss out, according to the Center for Budget and Policy Priorities. This is not because people are lazy or ignorant. They simply fail to realize that there also are nooks and crannies in the tax code that apply to them.
For example, the Center reports that 23 million families last year claimed Earned Income Credits worth $44.6 billion. However, another 5 million eligible families did not file for these EICs. This is despite the fact that a family with one child can qualify for up to $2,917, and a family with two children can reap up to $4,824.
For another example, do you recall those original George W. Bush "economic stimulus" checks last spring that were for either $300 or $600? According to the Center, there were 20.5 million low-income senior citizens, disabled veterans and other people with disabilities who normally did not file tax returns, but they had to file a "zero-owed" form in order to get the stimulus check. Some 16 million learned that they needed to do this, but another 4.5 million did not, and they missed out.
The folks at the IRS decided to give these 4.5 million people a second chance, if they file for what is known as a Recovery Rebate Credit. These people need to realize that they really do qualify, even though they pay no taxes, but that they must file a form. They also need to realize that this $300 or $600 boost will not affect other benefits that they already receive, such as Medicaid or food stamps.
Yes, indeed, these tax questions can become complicated. That's why the VITA and the CAC free tax preparation services are so valuable.
Welfare Reform and Tax Credits
A point of political history is involved. Most people are aware of debates regarding the pros and cons of welfare, but fewer people realize that various low-income tax credits are a political result of these debates.
During the 1960s, the now-departed Senator Daniel Patrick Moynihan first suggested the concept of a "negative income tax." He proposed that the lowest-income workers not only would pay no federal income taxes, but that they would receive credits for working. Therefore, the term "negative tax" is based on mathematics, not on a negative attitude.
The first goal of Moynihan's negative income tax concept was to encourage more people to work, rather than feeling they would be better off on the public welfare dole. Second, just as important, the negative income tax would allow the federal government to hold the minimum wage in check, an idea that was highly popular with business owners.
Instead of higher wages, the working poor would receive tax credits.
The concept of a negative income tax is embodied at the lower end of the Earned Income Credit, as well as the Child Tax Credit. President-elect Barack Obama is facing criticism for his desire to expand these credits, but Moynihan's negative income tax originally was considered a conservative idea that was embraced by the likes of Richard Nixon, Ronald Reagan and especially Bill Clinton. (So Sean Hannity – shut up and take a seat!)
Don't Assume You Aren't Eligible
The Center for Budget and Policy Priorities pushes local groups to establish "Tax Credit Outreach Campaigns." Organizers from the Washington-based nonprofit group say their two main challenges are to convince skeptical people that they are eligible for these credits. Some people think they earn too much money, while others perceive that they don't earn enough.
Details may seem endless. Here are a few more items:
There's more. As an everyday citizen, you need not know all of these ins and outs. They key is to be aware of resources, such as the VITA and CAC tax preparation programs, as well as reputable companies that charge fees. It's also important to steer people away from "rapid refunds" or "refund anticipation loans" that exploit low-income people.
VITA tax preparation begins on January 26. Sites include Butman-Fish Library at 1716 Hancock (9 a.m. to 3 p.m. Mondays and Tuesdays, 9 a.m. to noon Wednesdays); National City Bank at 1140 S. Outer Drive (9 a.m. to 3 p.m. Thursdays and Fridays); Hoyt Library at 505 Janes (9 a.m. to 1 p.m. Fridays); Town & Country Family Credit Union at 2796 Erna (by appointment); and Frankenmuth Credit Union at 580 N. Main (by appointment). To repeat, the number is 755-0505.
CAC tax preparation begins February 2 and is offered from 9 a.m. to 4 p.m. Mondays through Fridays at the CAC Center, 2824 Perkins. Call 753-7741.
Anyone who wishes to obtain a package of tax information and outreach materials may simply visit the Center for Budget and Policy Priorities' website at www.cbpp.org/eic2009, or call 1-(202) 408-1080.
To learn the potential amount of your Earned Income Credit, check the Center's EIC Estimator at www.cbpp.org/eic2009/calculator/eitcchoose.htm.
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THE NEW GILDED AGE (Part 2)