Too many Detroiters not claiming tax credit, losing money
Either a lot of Detroiters have so much money in their bank account that there just isn’t room for much more, or perhaps they don’t know about the Earned Income Tax Credit (EITC) that they may be eligible for.
Detroit’s Chief Government Affairs Officer Lisa Howze says that she – and her boss, Mayor Mike Duggan – are pretty certain the problem isn’t too many rich Detroiters. Which means not enough people know about the EITC, which is why Howze is now in charge of the effort to help educate more Detroiters this tax season about how they can claim their fair share of the literally millions of dollars that go unclaimed every year.
So if you don’t make a whole lot of money, and could use some more money, then this bit of information just might be for you.
MC: What is the issue we need to let people know about?
LH: So the issue is that that there’s been an estimated $80 million per year that’s left on the table in unclaimed federal income tax credits. In the City of Detroit. So when you think about where does that number come from? The IRS estimates that about $327 million comes back to the City of Detroit for residents who do file and claim the Earned Income Tax Credit (EITC)
So they account for that being about an 80 percent uptick. So when you do the math, the 20 percent that’s not being accounted for amounts to about $80 million.
MC: Why aren’t people claiming this money?
LH: They don’t know about it. [They think] hey, I don’t have to file a tax return this year because I didn’t make a lot of money. And so those persons won’t file. But in order to claim the EITC you have to file a tax return. So if you think about who falls into that category more; probably your younger individuals. Maybe they worked a part-time job in some type of service job. Maybe it was fast food. Maybe they only worked the latter portion of 2016. So if that person only earned, say, only $8,000. They’re single, they don’t have any dependents to claim. They earned $8,000 in 2016 then they could be eligible for $500 in EITC. So you literally can get more moneuy back from the federal government than you had to pay in.
MC: And this money would come directly to them?
LH: Yes. They would complete a tax return, and a part of that return is the EIC schedule that would get filed along with their federal tax return. The EITC is based on income, the number of dependents or qualifying children that you file for. So it can be zero up to 3 or more. And the filing status. So single, head of household, qualifying widower, is that person that’s considered single, or individual. And then there are families. So a married couple filing a joint return. You have to file a joint return, not married filing separately.
MC: What are the levels?
LH: So let’s say a married couple filing a joint return collectively earned $23,000 in 2016. And they had 3 children. That family would qualify for the maximum EITC which is $6,269. Let’s say for example you are a family that made $8,000 you could earn as much as $500 back.
Now there are some people who say ‘I made a little bit more than $23,000 last year, but not quite the $54,000 that’s the upper limit? For the married couple with 3 children? Let’s say I fell within that range; I made $27-33,000. That family would get back upwards of $4,600. So it’s a significant amount of money that’s available to them. The other part of this campaign is to really let Detroiters know that there’s access available to free tax assistance. So they can keep more of their tax refund by seeking out free tax assistance that’s made available through the Accounting Aid Society (AAS). That’s the organization that the City of Detroit has partnered with in this initiative.
We have set a goal to increase the number of EITC returns by at least 1,000 in 2017. And so the more we build awareness around this, the more we also direct people toward self-preparation that they can get comfortable in taking ownership of their own financial health and their own financial lives to where they can keep all of their money and expedite the process of getting that return done.
MC: What’s the qualification to be accepted by AAS for free tax assistance?
LH: For married couples, it’s almost synonymous with what the income levels are for the EITC. If you earn less than $54,000 a year then you will be eligible to receive that free tax assistance.
MC: How long has this been an issue for Detroiters not claiming benefits?
LH: It’s a federal program that has been available for a number of years. Mayor Duggan actually mentioned last year that he wanted to make this a priority for the administration. He saw what they were doing in the City of New York in that they were able to increase the number of people filing for the EITC over a three-year period of time.
MC: What’s the benefit for the City when more people apply for EITC?
LH: Well the main thing is you’re putting more money back into people’s pocket that will allow them to, number one, avoid tax foreclosure so they’ll be able to stay in their homes. They can put more food on their table, purchase clothing, gain access to transportation, and really create a savings for the future. So this is money that we can ill afford to have left in Washington D.C., as tough as times are.
MC: Does AAS provide financial counseling?
LH: They do have that as a part of their portfolio. One of the main things is we want to make sure that not only do people get extra money back, but they have some options for what they can do with that money [to help people maximize their financial potential].
MC: Have you seen evidence that people are responding?
LH: Ever since the mayor’s announcement on Jan. 26, 211 has had a significant increase in call volume with people calling about the credit.