The Consequences of Insufficient Household Income

More documents

Recommendations

Info

Lynette, a single working mother, can’t wait to file her taxes each year. The sooner she files, the sooner her refund arrives. Lynette, a full-time clerk at a local police department, counts on that money to keep her family afloat, covering basics her paycheck cannot. The refund – in the thousands – means her two young children can also access quality educational experiences that otherwise would be out of reach. While she’s working full time, her children can attend afterschool programs and summer camp, expanding their horizons and giving her peace of mind. “Without that refund, I can’t survive,” she says. Lynette’s refund is boosted significantly by receiving critical tax credits such as the Earned Income Tax Credit (EITC) and the Child Tax Credit. According to the IRS, one-in-five households in the United States eligible for the Earned Income Tax Credit does not claim it, leaving an estimated $1 billion unclaimed. Photo courtesy of United Way in Louisiana. For comparison, these amounts are significantly less than credits and deductions received by higherincome households. The mortgage tax deduction for households earning $100,000 to $200,000 was $9,315 in Oregon and $7,970 in Louisiana, and deductions are even larger for those with higher incomes (Internal Revenue Service, 2014; Internal Revenue Service, 2014b). EITC primarily helps those with the lowest incomes. Across the 15 states with United Way ALICE Reports, the median adjusted gross income of EITC filers ranged from $13,110 in Michigan to $15,126 in Idaho and Iowa. By comparison, the average Household Survival Budget for a family of four was $54,564 in Michigan, $47,676 in Idaho, and $46,020 in Iowa. These tax credits help families move above the FPL, but not to financial stability (Marr, Huang, Sherman, & Debot, 2015; Hungerford & Thiess, 2013; Brookings Institution, 2016; United Way ALICE Project, 2016). Consequences Missed tax savings: ALICE and poverty-level households often miss out on tax saving opportunities. Those who are eligible must also be aware of the credits, fill out the appropriate tax forms, and submit the required documentation. For many, this is a daunting task, and particularly so for people with low English fluency or without internet access. Many households are not eligible for tax credits; EITC and CTC are aimed at families with children, yet in today’s society, families with 78 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME
children under the age of 18 make up only one-third of households in most states. For taxpayers eligible for the EITC with no qualifying children, the credit does little to offset income and payroll taxes. As a result, they often pay a higher rate of taxes than wealthier households (Internal Revenue Service, 2014; American Community Survey, 2014). High rates for tax preparation: Receiving tax credits depends on filling out tax forms correctly. Free tax preparation assistance is available in many locations, yet some workers either are not aware of this service or tend not to trust it. For example, according to a 2015 report to Congress, 60 percent of all Hispanic taxpayers use unregulated return preparers rather than an attorney, certified public accountant, or enrolled agent, compared to 18 percent of all U.S. taxpayers. Because unregulated preparers don’t need to meet minimum standards for competency and ethics, their clients run the risk of having their returns prepared incorrectly and paying exorbitant fees (Internal Revenue Service, Taxpayer Advocate Service, 2015a; Internal Revenue Service, 2015a; Internal Revenue Service, Taxpayer Advocate Service, 2015b). Strategy 2: Avoid Paying Taxes With the rise of the “gig” economy, there are more opportunities than ever before to earn income “off the books” and avoid paying income taxes. While this is not a new option, it has become much more common in the last decade with the advent of on-demand apps such as Uber, Etsy, and Airbnb. There are millions of service providers and sellers working and earning income in the on-demand platform economy, with an average monthly income ranging from $314 to $533. This income is not readily identifiable by government tax authorities (Bruckner, 2016; Morse, Karlinsky, & Bankman, 2009). Even on-the-books freelance and contract workers, whose numbers are also growing, sometimes try to delay or avoid paying taxes. While income and payroll taxes are automatically taken out of a salaried worker’s paycheck, contract and freelance workers are left to make tax payments themselves, typically as estimated quarterly taxes. These workers may delay or decide against paying quarterly taxes in order to keep more of UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 79
Page 1 and 2:
ALICE: THE CONSEQUENCES OF INSUFFIC
Page 3 and 4:
THE ALICE RESEARCH TEAM The United
Page 5 and 6:
ALICE: BRINGING HARDSHIP INTO FOCUS
Page 7 and 8:
TABLE OF CONTENTS INTRODUCTION ....
Page 9 and 10:
...AND FOR ALL FAMILIES IMPACT ON T
Page 11 and 12:
• The ALICE Threshold - a bare-mi
Page 13 and 14:
The purpose of this report is to pr
Page 15 and 16:
Figure 3. Monthly Housing Costs and
Page 17 and 18:
In 2014, the U.S. states with the h
Page 19 and 20:
No mother ever envisions finding he
Page 21 and 22:
Long-term effects on health and wel
Page 23 and 24:
friends grew to 7.7 million people
Page 25 and 26:
twice as much as redevelopment of i
Page 27 and 28:
UNITED WAY ALICE REPORT - THE CONSE
Page 29 and 30:
Figure 5. Monthly Child Care Costs
Page 31 and 32:
and accredited child care center fo
Page 33 and 34: Having a child with special needs h
Page 35 and 36: The slow progress in national enrol
Page 37 and 38: Loss of education advancement: Near
Page 39 and 40: Strategy 8: Drop out of High School
Page 41 and 42: time students and 76 percent of par
Page 43 and 44: • Closing the education achieveme
Page 45 and 46: UNITED WAY ALICE REPORT - THE CONSE
Page 47 and 48: Figure 7. Monthly Food Costs and Pe
Page 49 and 50: • For children, lack of sufficien
Page 51 and 52: Stigma: For many families, using pu
Page 53 and 54: FUTURE TRENDS: FEEDING ALICE More y
Page 57 and 58: $26,960 annually (if full time, yea
Page 59 and 60: Difficulty accessing health care: U
Page 61 and 62: Despite working full time (and havi
Page 63 and 64: Additional costs of longer commutes
Page 67 and 68: • Health and financial stability
Page 69 and 70: of seniors living in poverty have h
Page 71 and 72: educational consequences of untreat
Page 73 and 74: survey said cost was the primary re
Page 75 and 76: had to use their own money or modif
Page 77 and 78: others, such as caregivers of elder
Page 79 and 80: the minimum income required to rece
Page 83: In the states with the most regress
Page 89 and 90: • Assistance. Public and nonprofi
Page 93 and 94: Aron, L., Honberg, R., & Duckworth,
Page 95 and 96: Carnevale, A., Rose, S., & Cheah, B
Page 97 and 98: Cunningham, A., & Kienzl, G. (2011)
Page 99 and 100: Glover, R., Miller, J., & Sadowski,
Page 101 and 102: Johnson, R. (2015). Housing Costs a
Page 103 and 104: Mayer, C., & Pence, K. (2008). Subp
Page 105 and 106: Perez, G. (2016). Latino State of E
Page 107 and 108: Stetser, M., & Stillwell, R. (2014,
Page 109 and 110: United Way ALICE Project. (2016). 2
show all

The Consequences of Insufficient Household Income

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?