In 2021 it is particularly important that everyone complete a federal income tax return. This is especially true for workers who have seen their income drop, or who earn very little. The IRS is the main vehicle to distribute federal stimulus and economic recovery payments. And the America Recovery Plan Act (ARP) made changes to tax credits including the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) which benefit most Ohio families. Some could begin to get regular payments of the anticipated tax refunds directly from the federal government with no fees starting this summer, plus a much larger refund check next spring – but only if the IRS has their information. The good news is that there is still time. The deadline to file 2020 income taxes has been extended from April 15 to May 17 this year. State and most local deadlines have also been extended.
The deadline to file 2020 income taxes has been extended from April 15 to May 17 this year.
Across Ohio, workers claimed more than $2.2 billion in EITC in 2018, the last year for which data is available. This included more than $303 million for Cuyahoga County residents. The average EITC amount per tax return in Cuyahoga County was more than $2,600, which is higher than the national average of $2,461. Nearly 90 percent of that $303 million was refundable, meaning that taxpayers received the credit as a tax refund. The IRS estimates that about 20 percent of people who qualify for the Earned Income Tax Credit don’t take advantage of credits they qualify for, usually because they haven’t filed a tax return. In Cuyahoga County alone, that could mean as many as 29,000 workers are leaving an estimated $75 million in unclaimed credits each year. Across the state, unclaimed EITC credits could top half a billion dollars each year. The only way workers can get the money they deserve is to file federal income taxes and fill out the form correctly.
Nearly 20 percent of people who qualify for the Earned Income Tax Credit don’t take advantage of credits they qualify for, usually because they haven’t filed a tax return.
It is especially important this year for families with children to file their taxes. Enhancements to the Child Tax Credit included in the ARP increase the value of CTC in 2021 to $3,600 per year for each child aged 5 and younger, and $3,000 for each child between the ages of 6 and 17. The Center on Budget and Policy Priorities estimates that 92 percent of Ohio’s children benefit from this and other changes. The legislation also called for half of the expected credit to be delivered to families “periodically” before the end of the calendar year. This means the potential for a $250 or $300 payment per child deposited every month in the second half of 2021. In 2018, when CTC was capped at $1,000 per child, Cuyahoga County residents filed 81,630 tax returns that claimed $140 million in Child Tax Credits. Using estimates for Ohio, Community Solutions calculated that the CTC enhancements could have the effect of lifting more than 10,000 Cleveland children out of poverty.
Filing 2020 federal income tax returns this spring is also the last chance for Americans to get stimulus checks from the first two rounds of recovery payments authorized in 2020.
Filing 2020 federal income tax returns this spring is also the last chance for Americans to get stimulus checks from the first two rounds of recovery payments authorized in 2020.
Low-income households are not required to file federal income taxes. Thanks to tax changes in recent years, more American workers don’t need to pay any federal income tax. Yet some employers still withhold federal income tax from paychecks and the only way for families to get those hard-earned dollars back is to file their taxes. This is especially important for people whose hours were cut or who were unemployed anytime during 2020.
Cleveland is the poorest large city in the United States and has the worst rate of child poverty. According to the U.S. Census Bureau, refundable tax credits like the EITC and CTC lifted 4 million American children out of poverty in 2019, more than any other government program. That number could be even higher if more eligible families participate. Efforts in recent years have successfully encouraged low-income families to file income taxes and claim tax credits for which they qualify. The IRS lists places that provide free tax preparation help here. Families can also call 2-1-1 or visit https://www.211oh.org/ to be connected with help. This year in particular, filing federal income taxes could be more than worth it.
