Online Tax Tools and the Earned Income Tax Credit
NPower’s EITC Project partners with nonprofits that serve low-income communities to teach their clients how to use technology to calculate EITC eligibility and file tax returns which helps move them out of poverty.
Each year, low-income families miss out on the chance to receive a tax credit that could help them move out of poverty, as millions of dollars go unclaimed in the government’s Earned Income Tax Credit (EITC) program. The EITC is a refundable federal income tax credit available to low income families, but many eligible families and individuals do not file for the EITC, whether due to lack of knowledge about the credit, uncertainty about how to apply, or other reasons.
Approved by Congress in 1975 to offset social security taxes and to provide an incentive to work, the EITC has been credited with lifting more children out of poverty than any other single program. Research indicates that families use the EITC to pay for necessities, repair homes and vehicles needed to commute to work, and to boost their earning power by obtaining additional education or training.
NPower Seattle’s EITC Project partners with nonprofit organizations that serve low-income communities to teach their clients how to use free technology tools that calculate EITC eligibility and file tax returns. We focus on the nonprofit staff providing them with the information and tools they need to reach their clients more effectively by offering staff training, customizable outreach templates, training materials, and an interactive toolkit on Using Free Online Tools.
The immediate goal of the project was to inspire more widespread use and accelerate the adoption lifecycle of technology tools that address the problem of unclaimed Earned EITC credits. Secondarily, we wanted to achieve a $2 million increase in the tax credits received by Washington State low-income families and individuals in 2006 and 2007. Longer term, the project will demonstrate the effective adoption of online tools by low income families and individuals in our community to access services and to advocate for their needs.
The EITC project was generously funded by The Medina Foundation and Communities Connect and was designed to be self-sustaining after its initial two-year project phase. Sustainability will occur in several ways:
- First, by the continued utilization of the Using Free Online Tools Toolkit which was distributed widely and consists of a workbook and resource CD whose content includes relevant case studies, interactive exercises and links to tools and resources.
- Second, by the Technology Adoption Model, a basic tenet of the project which built capacity in nonprofits to adopt new practices around the EITC and to begin thinking about other ways in which technology such as free online tools can be used as a service delivery mechanism.
- Third, by the continued efforts of our early adopters and other non-profit organizations such as Communities Connect who will continue to promote the free technology tools that exist to help community-based organizations make an impact.
Approximately 26% of eligible EITC recipients in Washington State do not file their taxes, forgoing $75 million in unclaimed dollars. EITC dollars go unclaimed because families may not know about it; may mistrust the government; may fear filing taxes (either because they think they will owe taxes, or lose other public benefits); or they may want to claim EITC, but require assistance. One of the barriers to offering assistance via existing community organizations is that staff and volunteers are not qualified to provide tax advice, nor is there an awareness of the technology tools available to assist in these efforts.
Many non-profit organizations already have trusted relationships with the low income families and individuals we wanted to reach, but in order for us to leverage those relationships we first needed to create awareness of this issue with the organizations, then create incentives for them to think differently about their service delivery options in light of the new capabilities online technology tools afford. We created the materials and tools needed to support this outreach and identified a cohort of early adopters to whom we provided training on technology tools in the areas of outreach, awareness raising and actual filing of taxes.
The initial milestone of the EITC project was identification of a handful of early adopter nonprofits ready to help vulnerable populations file for the EITC in 2006. With the help of the early adopters we tested various tax preparation tools and developed outreach strategies in a range of intensities to fit the mission and capacity of our nonprofit partners.
From our experience working with the early adopters, we created the Using Free Online Tools toolkit, which contains assessments of what is needed to be successful, lessons learned, suggestions about how technology can help with outreach and marketing and provids recommendations on the practices that work best in various service delivery situations.
We then determined an evaluation model to capture meaningful Return on Investment information and enacted a compelling Technology adoption model of how promising practices would play out in a wider base of nonprofits.
We also built a range of awareness raising activities tailored to inspire nonprofit leaders and practitioners to adopt new practices around the EITC appropriate for their mission and operations and most importantly, we put significantly more money in the hands of low income families and individuals. In addition to scaling the cost-effective assistance to accessing the EITC, this project also built a new capacity in nonprofits to think about online tools as a potential service delivery tool or way to engage the community in a meaningful way.
Each year, low-income families miss out on the chance to receive a tax credit that could help them move out of poverty, as millions of dollars go unclaimed in the government’s Earned Income Tax Credit (EITC) program. NPower Seattle’s EITC Project partners with nonprofit organizations that serve low-income communities to teach their clients how to use free technology tools that calculate EITC eligibility and file tax returns. NPower provides staff training, customizable outreach templates and training materials, as well as an interactive, practical toolkit on Using Free Online Tools.
re sustainability
I love this project, but I think you need to find a different way to talk about, and perhaps to think about, its sustainability. As I read what you've written, you are basically seeking to propogate these tools in a way that will be no cost/self-perpetuating. If that is the case, you should say it more clearly. However, I would assume that there will always be some cost to maintaining and disseminating the tool. And this tool is helping people access a lot of money,a nd npos do their job better. It would see there are revenue possibiities there.
Sustainability questions
We really grappled with this question. We also wondered whether this project fit within the Net2 framework. But we thought it was exciting work to share so gave it a shot.
Originally the project focused on technology adoption and helping accelate the use of these tools by nonprofit staff. Our aim would be to sustain the efforts to help nonprofits adopt these types of tools. NPower isn't maintaining the tax tools but there are groups that are - like I-CAN and One Economy
Disseminating is not without its costs, and we've be seeking philanthropic support. We struggled to find earned revenue potentail and would love ideas.