Tax time often comes as a relief to low-income, working families. For those who qualify for the Earned Income Tax Credit, a large sum of money refunded them at the end of the year manages to keep them afloat. The credit reduces the amount of tax owed and often gives the tax filer a substantial refund. The program began in the 1970s as an antipoverty program.
“As incomes among the country’s lowest wage earners continue to stagnate, the credit has played a critical role in smoothing the hard edges of an unforgiving labor market for the country’s most vulnerable workers and helping stem the tide of income inequality that has been rising among Americans in recent decades” (Tavernise, Sabrina. (2012, April 17). Antipoverty Tax Program Offers Relief, Though Often Temporary. The New York Times).<!- mfunc search_btn -> <!- /mfunc search_btn ->
The Earned Income Tax Credit is often spent rather than saved. The recipients need the extra boost to pay bills, buy a new appliance or catch up on rent. Statistics show one in five tax filers receive the credit. This means the government pours millions of dollars back into families at the end of the tax year to subsidize their low wages. It is estimated that the tax credit lifts six million Americans out of poverty each year.
The refund can amount to as much as 40 percent of a family’s income. This is a substantial compensation. But it often offers merely temporary relief from the effects of low-wage work and reliance on credit cards to survive. Hiring a tax accountant helps ensure the filer will receive the appropriate refund due him. Unfortunately, many low-income filers are taken advantage of by dishonest scams and high tax preparation fees.
Many who have received the credit don’t do so for very long. They experience a change in circumstances, perhaps better employment, that enables them to move into a higher income bracket. This means not receiving a large tax refund at the end of the year. Instead, they have more money throughout the year in the bank to cover their monthly expenses. It’s no longer feast or famine for these families.<!- mfunc feat_school ->