The Earned Income Tax Credit is a poverty relief program built into the tax code. It allows working families who live at or below the poverty threshold to get a tax refund for greater than what they paid into it at tax time. A family of four can get up to $5,000 a year back at tax time. It’s hardly a windfall when you’re living on the edge.
Just 75-80% of families who qualify for the EITC actually receive it. The tax forms for receiving the EITC are long and complex–so much so that even the IRS has a large error rate in processing the forms. This also means that those eligible for it sometimes need to turn to tax preparers to help claim it, who’s fees chip away at the refund they receive.
Julie, in Des Moines, Iowa, receives the EITC, and she was gracious enough to be honest and open about her income, expenses, and struggles in order to help share the importance of the EITC. Des Moines is the capitol city of Iowa, located in the heart of the Midwest. The state is often characterized by its cornfields, affectionately known as one of the breadbaskets of the United States. But people struggle with poverty everywhere, including in this Midwestern state.
Here’s Julie’s story, collected by Half in 10’s “Our American Story,” project. Julies story and many more can be found on their website here.
My name is Julie. I am here today to talk to you about the importance of the EITC and what it provides for my family. I am a single mother of three young children and I am currently working full time for a non-profit agency. I also attend Simpson College full time, pursuing a degree in accounting and business management. I feel very grateful to have a full time job and also the opportunity to pursue my degrees.
In my work I deal with a lot of single mothers who are living in poverty and cannot afford to support their families in the way that I can. However, I still have to watch every cent I spend and do not have luxuries that others have. Last year I made $33,173.00. Out of that, $6300.00 went to child care costs and $9900.00 went to rent and utilities. $2,000 more was taken out of my wages for payroll taxes. I of course also pay the gasoline tax and sales tax on items that are necessities for me and my children. Through all of this, the EITC has been an absolutely critical form of relief to my family.
The EITC refund in recent years has also allowed me to put a down payment on a reliable used car that gets me back and forth to work and school. This money also allowed me to save on buying propane because I have been able to buy in bulk.
This year for my federal taxes, I am scheduled to receive a $2279.00 EITC refund and an additional $3000.00 from the child tax credit. These refunds are very important to me and my family. I plan to pay for part of my summer college tuition fees, pay preschool tuition for my youngest child, and catch up on medical bills that were incurred as a result of my daughter’s illness. A portion of my return will go to saving accounts for my children. A few years ago we set savings goals so that they could save to have some money to start with when they become adults, something I wish I would have had at that age. They are encouraged to save birthday, Christmas, or and any money they earn doing chores and at the end of the year when I receive the EITC refund, I match whatever they have saved and we make a deposit into their account. None of my refund is spent on extravagant purchases, but instead represents the priorities of my family. Most of my refund is spent in my home town, on things that are important to us.
- Read more stories from Half in 10’s “Our American Story” Project here.
- Read “Earned income tax credit needs to be improved, not removed” by the Editorial Board of the Washington Post here.
- Read “Poor, with Savings” by Monica Potts for the American Prospect here.