Help With Tax Preparation

The Earned Income Tax Credit -EITC – is perhaps the best safety net program I’ve ever known. Actually, it is part of the tax code. Nonetheless, I have written about it in nine of the past twelve years in this blog. This year I’ll try to keep it simple.

Millions of taxpayers don’t get an EITC credit for a number of reasons. They don’t know about it, they are perhaps paying income tax for the first time, or because tax preparation is way too complicated or expensive.

There is free tax software, if you read the fine print. Remember, the devil is in the details. Here are a couple tax assistance programs and how to access them. The first is Free File, a partnership between tax software companies and the IRS. This is the fine print you will read on the Free File website:

IRS Free File lets you prepare and file your federal income tax online for free. File at an IRS partner site with the IRS Free File Program or use Free File Fillable Forms. It’s safe, easy and no cost to you for a federal return. 

To receive a free federal tax return, you must select an IRS Free File provider from the Browse All Offers page or your Online Lookup Tool results. Once you click your desired IRS Free File provider, you will leave the IRS.gov website and land on the IRS Free File provider’s website. Then, you must create an account at the IRS Free File provider’s website accessed via Irs.gov to prepare and file your return.  Please note that an account created at the same provider’s commercial tax preparation website does NOT work with IRS Free File: you MUST access the provider’s Free File site as instructed above.

The other is MyFreeTaxes. United Way provides MyFreeTaxes in partnership with the IRS’s Volunteer Income Tax Assistance (VITA) program.

Local, county, and state government need to do more to spread the word. A number of organizations provide outreach tool kits to enable effective outreach campaigns. Let’s reach those who need the help the most. Participate on EITC Awareness Day, the last Friday in January.

There is a conspiracy that prevents tax filing from being easy. K Street lobbyist prevent IRS from sending out partially-prepared tax forms to each taxpayer. Do a web search: “lobbyist oppose free IRS tax software”. Write your Members of Congress to ask why.

My Earned Income Tax Credit page has been updated for the 2021 tax season to include up-to-date EITC income-eligibility guidelines plus links to programs mentioned above.

2019 Earned Income Tax Credit (EITC) Information

The Earned Income Tax Credit (EITC) is a refundable tax credit for families and individuals who have income from employment. It increases the amount refunded to a taxpayer or reduces the amount of tax owed. For 2018, 576,000 filers in New Jersey were able to be credited $1.4billion with an average tax refund of $2,360. However, almost 25% of eligible New Jersey taxpayers never file for EITC. You must file a tax return to claim your EITC.

Twenty-nine states, including New Jersey, maintain their own EITC program. New Jersey taxpayers may receive a credit equal to 39% of their federal credit. It is based on their employment earnings, filing status, number of children and adjusted gross income (AGI).

Income Limits and Maximum EITC Credits

Number of Qualifying Children Single/Head of Household or Widow(er), Income Must be Less Than Married Filing Jointly, Income Must be Less Than Maximum Federal Credit Maximum NJ State Credit
No Child $15,570 $21,370 $529 $206
One Child $41,094 $46,884 $3,526 $1,375
Two Children $46,703 $52,493 $5,828 $2,273
Three or More Children $50,162 $55,952 $6,557 $2,557

The EITC Assistant is an online tool to estimate if an individual or family may qualify by answering a number of questions. The IRS also publishes a one page fact sheet, IRS Notice 797 and a more detailed booklet, IRS Publication 596.

Free assistance to prepare and file your federal income tax return is available from a number of organizations and programs. The United Way and H&R Block partner to offer MyFreeTaxes. All income levels are eligible to file both federal and state returns for free using MyFreeTaxes.com. Also available is Free File another free, easy to use online software program. Taxpayers whose adjusted gross income is $69,000 and below are eligible. The AARP Foundation Tax-Aide program offers free tax preparation to low and moderate-income taxpayers, especially age 50 and older.

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $56,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. Most VITA and TCE sites are open February to April.

The IRS provides a Find a Location for Free Tax Help page. The NJ 2-1-1 Partnership maintains a NJ Free Tax Assistance Locations page. South Jersey residents in Atlantic, Burlington, Camden, Cape May and Cumberland Counties, as well as residents in Philadelphia and Montgomery County, can get tax preparation help from the non-profit Campaign for Working Families.

Non-profits, advocacy groups and government agencies can participate in outreach efforts by promoting the NJEITC page and their NJEITC Informational Flyer. Groups interested in conducting an outreach campaign or promoting EITC on social media should subscribe to the Center on Budget and Policy Priorities’ Get It Back Campaign.

Employers are encouraged to distribute copies of “Have You Told Your Employees About the Earned Income Credit (EIC)?”, available as Notice 1015 by the IRS. The New Jersey Division of Taxation publishes a Statement to Employees.

Smartphone users can download IRS2Go, the official IRS mobile app. You can use it to check your tax refund status or find free tax prepartion services, or even to send a payment to Uncle Sam.