Month: January 2012

The Internal Revenue Service has declared January 27, 2012 as Earned Income Tax Credit (EITC) Awareness Day. It is a program enacted in 1975 during the Nixon Administration and expanded during the Reagan years. Although technically a tax program, it is considered one of the principal social programs for working families. Nationally, in 2011 over 26 million taxpayers received $59 billion in EITC tax refunds. EITC rewards work and reduces poverty.

An IRS spokesperson recently stated, “If you worked any part of last year (2011) and your income was around $49,000 or less see if you qualify for the Earned Income Tax Credit, or EITC.” It can put extra money in a family’s pocket, up to $5700. In New Jersey in 2011 552,000 households received $1.17 billion via the EITC credit, with an average refund of $2,117. For a single parent with one child it is estimated that EITC effectively raises wages by $1.25 an hour.

An EITC Tax Tip Video makes a number of suggestions. They include:
1) Use free brand name tax software through IRS’ Free File program if your adjusted gross income is $57,000 or less. For details visit the IRS Free File: Do Your Federal Taxes For Free page.
2) Utilize the services of any of the 400 nationwide IRS Taxpayer Assistance Centers to get face-to-face tax help. In New Jersey there are twelve local offices located in Cherry Hill, Edison, Fairfield, Freehold, Jersey City, Mays Landing, Mountainside, Newark, Paramus, Parsippany, Paterson, and Trenton. Visit the link for locations and telephone numbers.
3) Take advantage of local and free tax preparation sites – known as VITA or AARP Tax-Aide sites – during the tax season. For a comprehensive and up-to-date list of New Jersey tax assistance sites visit the NJ 2-1-1 website. To locate the nearest VITA site, call 800-906-9887, if you do not have Internet access. In New Jersey, dial 2-1-1 or 877-652-1148 to find the closest free tax preparation site.

There are a couple tips that I also would like to pass on. They fall into the category of consumer protection and financial literacy. Does it make sense to pay $100 or even $200 to a commercial tax preparer if you can have your tax preparation done for free and get your refund via direct deposit? You should be familiar with the term “rapid refund” and currently known as a “refund anticipation check”. They are nothing more than expensive loans. In the consumer affairs community these services are known as Refund Anticipation Loans or RALs. For a good explanation of how expensive RALs are see a recent National Consumer Law Center report. Fortunately, 2011 may be the last year in the life of these loan schemes.

In the past couple years a number of VITA programs have partnered with financial institutions to enable tax filers to open accounts with the idea of getting a tax refund quicker via direct deposit. New Jersey consumers are fortunate in having available to them low-cost, low-volume basic checking services known as New Jersey Consumer Checking Accounts. If you want to promote financial literacy and encourage consumer education spread the word about consumer checking accounts.

For additional information on tax preparation programs and organizations that sponsor them, visit the New Jersey Community Resources’ NJ Earned Income Tax Credit web page.