Tax assistance available for low-income people facing challenges collecting credits and stimulus checks
People who did not receive one or both of the federal economic stimulus checks distributed last year, or who did not get the full amount of aid they are eligible for, will be able to claim these payments in their 2021 tax filing through the recovery rebate credit.
The two Economic Impact Payments (EIPs) were distributed automatically to qualifying U.S. residents through the CARES Act in March and the relief bill passed late in December. But the Treasury Department has noted that there have been issues for some seeking to claim their EIP. In some cases, checks sent to individuals’ last known addresses did not reach their intended recipients. In others, the intensely expedited rollout schedule required by December’s relief bill caused some checks to be delivered to closed accounts.
In addition, people who have not filed taxes in several years — including many people experiencing homelessness — may not be known to the IRS and may have missed the first rounds of stimulus as a result, according to Deacon Jim Shanahan, director of the Financial Stability Network at Catholic Charities D.C. Nationally, the number of unclaimed checks from the first round of stimulus may have been as high as 9 million several months after distribution began. In an email, Mike Littmann, a VITA tax preparer at the FSN, added that “just by filing, the IRS will now have information on the homeless individual, ensuring they get the stimulus check(s) they might not otherwise receive.”
[Disclosure: Jim Shanahan of Catholic Charities and this reporter are members of the same Catholic parish in Maryland.]
The IRS attempted to stem these problems by offering a non-filers option on their online portal, by utilizing direct deposit when possible, and by encouraging the use of 2021 taxes to claim any missing funds, according to IRS Commissioner Chuck Rettig. “Throughout this challenging year, the IRS has worked around the clock to provide Economic Impact Payments and critical taxpayer services to the American people,” Rettig said.
Noting that “a very, very large number of people have still not gotten any economic stimulus checks,” Shanahan emphasized the importance of filing for the recovery rebate credit. He said that the refund will function like a typical tax return for those who file for it, with uncollected funds being “sent to the individual as a tax refund along with other refundable credits like the Earned Income Tax Credit.”
Shanahan stressed that “if [an individual] didn’t affirmatively apply for economic stimulus last year,” it is essential that they file their taxes to reclaim the amount they are owed. “If they don’t come forward,” he said, “the IRS doesn’t know they exist, and they can’t get economic stimulus payments” or collect tax refunds. According to remarks made in an IRS press briefing on Feb. 11, “line 30 on the tax forms 1040 and 1040 SR is where [tax filers] will find the RRC [recovery rebate credit].”
Challenges and misconceptions prevent low-income filers from accessing tax credits
Aside from COVID-related economic relief, many filers will also have access to the usual tax credits available to individuals with low-to-moderate incomes. The Earned Income Tax Credit (EITC), most often available to low-income claimants with children, is “the biggest financial resource that a low-low-income or low-income family can receive,” according to Joseph Leitman-Santa Cruz, the CEO and executive director of Capital Area Asset Builders. He added that the District of Columbia can match up to 40% of the federal EITC. “Many people who are homeless have some income,” Littman said, making them eligible for “between $538 and $6660, depending on how much the homeless individual earned in 2020 and how many children they have.”
Other resources include the Child Tax Credit (CTC) and Additional Child Tax Credit, which can allocate up to $2,000 per eligible dependent. Low-income D.C. renters are also eligible for the D.C. renters’ tax credit, which can provide up to $1,000 toward mounting rent bills.
In a hypothetical example of how tax credits work in tandem to assist low-income families, Shanahan noted that this year, a single mother with one child working a minimum-wage job could be eligible for $10,000 in refunds. That sum is composed of the EITC, the CTC, and two unclaimed stimulus payments.
But many of these credits go unclaimed, leaving $40 million in federal EITC funds undistributed each year, according to CAAB projections. “Unfortunately,” Leitman-Santa Cruz said, “at the national level, it is estimated that only four out of five EITC-eligible folks claim it; in the District of Columbia, it is slightly lower than that.” Locally, Shanahan noted, “there are approximately 20,000 families who are missing out on the Earned Income Tax Credit year in and year out” because they do not file taxes.
Misconceptions about who can or should participate in the tax process likely contribute to these missed rebates. Letiman-Santa Cruz stressed that “one does not need a permanent or formal residence to file taxes.” For people facing housing insecurity or homelessness, the address of a trusted non-profit with which a filer is affiliated can be used in place of a personal address. Moreover, people with no yearly income should also file tax forms, he said, adding that earnings from 2018 through 2020 can be retroactively reported regardless of their sum total. “That family might not owe any money to Uncle Sam,” Leitman-Santa Cruz said, “but Uncle Sam might owe that family thousands of dollars.”
Tax Preparation Services Available for Low-Income Filers
Several services are available in the D.C. region to help low-income filers obtain the funds they are owed through tax credits. Three Volunteer Income Tax Assistance (VITA) programs work in partnership with Capital Area Asset Builders: Community Tax Aid, United Planning Organization (UPO), and the Financial Stability Network of the Catholic Charities of the Archdiocese of Washington. In addition, United Way of the National Capital Area offers tax help in association with the D.C. Department of Insurance, Securities, and Benefits. All of these services are free for filers with an income of less than $57,000 per year and provide expert assistance in completing tax forms.
Shanahan said that filers should visit Catholic Charities’ online portal to participate in the VITA program. Community Tax Aid and UPO have similar websites where taxpayers can register for assistance. “What the taxpayer needs to send us,” he added, “is a picture of a social security card, a selfie of themselves with a [government-issued] photo ID card, and pictures of their tax documents, such as a W-2 form.” Welcome specialists can assist taxpayers with filling out a Google Form, locating tax documents and uploading forms to the IRS cloud, he said.
Littman said that more than 650 people had pre-registered for Catholic Charities’ services as of Feb. 9. He encouraged taxpayers to register as soon as possible for the first-come, first-served program and attributed the influx of users to a growing need for tax credits in the midst of an economic downturn. “On average,” he said, “we’re seeing people get back around $2,000 and sometimes as much as $10,000.” According to attorneys at the University of the District of Columbia Tax Clinic, “family-based tax credits, like the EITC, can help pull a working family out of poverty.” Stephanie Crane, Community Impact Manager at United Way of the National Capital Area, added that “the benefits are tremendous for residents — there is no cost to them, they get their taxes professionally prepared and filed, and have the potential of earning a larger refund.”
Littman also said that VITA programs offer a “trusted, free, reliable source for tax preparation,” unlike some for-profit tax services, which can claim up to half of the filer’s return. Shanahan stressed that “what’s important here is that 100% of the return goes into the pocket of the taxpayer.”
But filers often face challenges in obtaining the funds they are owed. In an email, attorneys at UDC Law’s Tax Clinic said that errors can easily arise when taxpayers fill out their tax forms, noting that “unfortunately, an innocent error in claiming the EITC can have repercussions, including a two-year ban on claiming the credit.” Additionally, the social security card, proof of income, and photo-ID needed to properly file taxes are sometimes unavailable to filers, resulting in further difficulty accessing tax credits. Crane recommended that filers in this situation contact a VITA site to speak to a tax professional. The UDC clinic also suggested that taxpayers who have encountered issues in receiving credits or filing taxes consult with a service that offers free legal representation. “A consultation with a tax legal clinic can pick up where a tax preparation site left off,” they said. “If a low-income worker encounters a problem with a refund, a free legal clinic specializing in tax issues provides an avenue to get legal assistance.” UDC Law’s Tax Clinic is available to assist taxpayers year-round, with reduced hours in the summer.
In addition to these perennial difficulties, accessing filing help has been complicated by COVID. According to a list of tax preparation clinics provided by United Way, only one out of 15 local sites offered in-person services, with the others offering either entirely virtual assistance or using a document drop-off method. In an email, Crane said that the “top priority [of United Way NCA] is the safety and well-being of our partners, staff and the communities we serve. Each location that is offering in-person services is practicing COVID-safety measures.”
Despite the risks, Littman noted that some filers are seeking in-person tax preparation assistance due to the difficulty many low-income individuals have in finding a computer or smartphone through which to access services’ online portals. With computers at D.C. libraries unavailable for public use due to pandemic precautions, many would-be filers have no way of accessing the internet. Littman suggested that the computers and phones of trusted family, friends, and neighbors are the best places to start while public facilities are closed.
While filing season opened Feb. 12, many clinics will not open their doors for several more days, citing policy changes, COVID precautions, and a backlog of registrations. Crane recommended consulting the website of each clinic to learn more about appointment availability in the coming weeks. With confusion mirroring that of last year’s tax filing season, Shanahan said “we’re hoping that the IRS pushes out the April 15 date.” Littman saw a silver lining, adding, “like last year, we suspect the IRS is going to extend again, which will hopefully give everyone the opportunity to get their information right.” Whether or not the deadline is extended, tax preparers urged low-income taxpayers to seek out assistance services immediately.
The IRS extended this year’s federal tax filing deadline to May 17. The D.C. Office of Tax and Revenue changed this year’s state tax filing deadline for the District to match the new federal deadline.
Local tax assistance
Capital Area Asset Builders
Financial Stability Network of the Catholic Charities of the Archdiocese of Washington*
*Few appointments available before March 21
Community Tax Aid *
*No information available before Feb. 22
United Planning Organization*
*For filers making less than $56,000 per year.
UDC VITA Tax Clinic
(202) 274 – 7000
United Way of the National Capital Area
UDC Law Tax Clinic
UPO Ralph Waldo “Petey” Greene Community Service Center*
2907 Martin Luther King Jr Ave SE, Washington, DC 20032
Type: Drop-Off Only
2/8/2021 – 4/15/2021
*Mon-Thurs; Spanish language available; no walk-ins allowed
Catholic Charities VITA*
2/1/2021 – 4/15/2021
*Spanish language available
The extended federal tax filing deadline announced by the IRS has been added.
The extended D.C. tax filing deadline has been added.