Tax Credits = Smiles, Hugs, and Financial Relief

Written by Susanna Birdsong, former NWLC legal intern

This post is the fifth in a series of weekly posts containing tax information and filing tips. Check back next week for our next post, or click here to read past posts.

On my first afternoon as a Volunteer Income Tax Assistance (VITA) site volunteer, I settled in to a computer station in the basement of D.C.’s downtown library to help people file their tax returns.  “And just one final question, if you don’t mind me asking,” I asked a mother as she smoothed hair out of her drowsy daughter’s face,  “how are you planning to use your tax refund this year?”  She smiled, and answered that she was planning on using the money to pay her bills.  “Every year, it’s what keeps us going,” she said. 

As a tax preparer with the local Earned Income Tax Credit (EITC) Campaign, this is one of the voluntary questions that I ask low-income taxpayers as I help them complete their tax returns.  The most frequent answer (by far) is the one this mom gave to me—the money’s going to pay the bills.  Most of the time the answer is accompanied by a smile of relief, and sometimes I even get a hug.  It is in these moments that I fully appreciate the power of refundable tax credits like the Earned Income Tax Credit and the Child Tax Credit. These are credits that are available to individuals and families via a tax refund, even when they make too little money to owe any income taxes.  Without them, making ends meet would be next to impossible for low-income families like this mother and her daughter. 

Following the recession, a record number of families are living in poverty, and it is increasingly apparent that wages are not keeping pace with costs of living.  Women with children are disproportionately represented among our nation's poor; in 2011, four in ten female headed households with children were living below the poverty line, even though many of these women worked at least part-time. 

Last year, the refundable Earned Income Tax Credit and the Child Tax Credit lifted 9.4 million people—including 4.9 million children—out of poverty.  Families are eligible for up to $5,891 from the federal Earned Income Tax Credit, and up to $1,000 per child from the federal Child Tax Credit.  In an economy that continues to stagnate for low-income workers, this income supplement offers a lifeline to millions of families who are struggling just to keep their heads above water.  This tax season, I’m thankful for refundable tax credits that add up to smiles, hugs, and much needed relief for the families I meet at the VITA site.