The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to reduce the income tax burden on low-income workers, to supplement wages, and to provide an incentive to work. The credit reduces the amount of federal tax owed and in most cases results in a refund check. The EITC is the single largest federal program designed to lift people out of poverty. To qualify for the EITC, taxpayers must work full or part time and have earned income of at least $1. Income and family size determine the amount of the EITC. To qualify, taxpayers must meet certain requirements and file a tax return even if they did not earn enough money to be required to file a tax return.

The Virginia Community Action Partnership (VACAP) EITC Initiative supports community groups and coalitions throughout the commonwealth as they provide free tax preparation services to low income working individuals and families. A team headed by VACAP, along with the Virginia Department of Social Services and the Internal Revenue Service, is working to promote the EITC through the Virginia CASH Campaign (CASH stands for Creating Assets, Savings and Hope). Collectively, the mission is to raise awareness of EITC among all taxpayers and to educate workers, employees, clients, and customers of the importance of obtaining all credits to which they are entitled. We encourage financial literacy, savings, and asset building as coalitions develop an outreach program to link EITC with other asset building programs. All programs enable clients to work toward self-sufficiency.

Approximately 22 percent of eligible Virginians do not take advantage of the EITC. It is estimated that millions of dollars go unclaimed annually. Unfortunately, many do not know the credit exists or how to obtain it. They may be eligible, but they do not file taxes. There may be a language barrier. To maximize recovery of all federal tax credits, community-based efforts are focused on outreach and education within each community. Trained volunteer tax preparers assist customers in filing electronic returns to maximize the value of the credit.

Between January 24 through April 17, 2006, over 600 volunteers working with 18 coalitions provided free tax preparation services to those eligible. Over 5,300 federal returns were electronically filed with refunds totaling over $6.3 million. Of those, over 1,900 claimed the federal Earned Income Tax Credit (EITC) with refunds of over $3 million. The value of the credit is preserved when those clients do not have to pay professional tax preparer fees. With at least 80 percent of the refunds remaining in the local community, a significant economic impact is felt.

For the 2006 tax year, 16 existing coalitions and nine new coalitions will be providing free tax preparation services to eligible individuals and families in Virginia. With the support of the General Assembly, we look forward to their success and eagerly anticipate the results.