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Published: Monday, 2/26/2007

Earned income credit helps struggling workers get by

One day last week, Dawn Barrett helped 12 inner-city Toledo taxpayers prepare their returns at the Frederick Douglass Community Center on Indiana Avenue.

They qualified for refunds totaling nearly $45,000, but about 60 percent of that came from the earned income "credit," which more accurately is a government transfer payment.

Those taxpayers got an average of more than $2,200 from the federal program that began very small in 1975 but has grown to involve more than 22 million households and more than $41 billion annually nationwide.

For some of the Toledoans, the extra money makes a big difference, said Ms. Barrett, operations manager for the center.

"One person said, 'I can catch up on my bills,' one opened up a bank account for the first time, and another said she can now get her car out of the repair shop," Ms. Barrett said.

But even as popular as the earned income credit has become, many taxpayers either don't know about it, or are fearful of the process.

The Internal Revenue Service recently reported that about a fourth of eligible Americans fail to file for the credit.

Over the years, eligibility has expanded greatly. For tax year 2006, the credit can be claimed by couples making up to $38,348 or singles earning up to $36,348 with two or more children.

Eligibility for those with one child tops out at $34,001 for couples filing jointly and $32,001 for singles.

Childless taxpayers between 25 and 65 can qualify too if they earn less than $14,120 for a couple, or $12,120 for an individual.

There are a few other rules. The filer must have some earned income from a job or self-employment, must have a Social Security number, and cannot have more than $2,800 in investment income.

The maximum credits range from $412 for those with no children, to $2,747 for those with one child, to $4,536 for families with two or more children.

Last year, more than 766,000 Ohio taxpayers collected nearly $1.4 billion from the credit, and in Michigan, 628,000 got more than $1.1 billion, the IRS said.

Still, many taxpayers don't realize how valuable the credit can be, said the National Women's Law Center in Washington, which last month announced a program to increase awareness of the credit.

The group put summaries of the benefits for the credit - and other family-oriented tax breaks such as child tax credits and child-care credits - on its Web site, www.nwlc.org.

Locally, a number of volunteer tax-preparation sites are concentrating on making sure families know about the credit, including Ms. Barrett's.

She has distributed many flyers in the neighborhood and hopes to get some mileage from word-of-mouth advertising.

- Homer Brickey



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