Earned Income Credit for Day Laborers and Others

Today is tax day and the earned income tax credit can be beneficial to many immigrant workers.

From Appleseed:

Report Urges Better Access to Tax Credit- Many Low-Income Workers Have Difficulty Claiming EIC 
 
Today is Tax Day, a time of consternation for last-minute filers struggling to complete and submit their tax returns by the deadline. For low-income workers who rely on the New York State Earned Income Credit (EIC) to help make ends meet – city and state earned income credits constitute about 15 percent of working poor families’ annual income in New York City – the filing process can be especially stressful.
 
According to a new report by New York Appleseed and The Financial Clinic, although the state EIC is considered one of New York’s most effective means of fighting poverty,  many qualifying workers are prevented from claiming thousands of dollars in tax credits each year because they are self-employed or paid mainly in cash.
 
Written with the pro bono support of White & Case LLP, “All Work and No Pay” shows that low-income self-employed workers and cash earners – taxi drivers, childcare providers, day laborers, etc. – are unable to claim EIC because they face income-documentation requirements that are ambiguously defined, poorly explained, and improperly administered. The report is available here.

“In spite of the publicity given to EIC as an anti-poverty measure, its current documentation rules lead to the denial of rightful claims by a huge population of cash earners,” said David Tipson, director of New York Appleseed. “Our report outlines a number of ways to make sure that deserving individuals and families are not shut out.”
 
New York City estimates that more than 150,000 residents never claim their federal, state and city earned income tax credits, totaling more than $160 million. To claim EIC, workers must document their earned income, but this requirement, as currently administered by tax authorities, trips up cash earners in ways that are unrelated to whether or not they deserve the EIC.
 
Some of the most notable obstacles facing cash earners are that tax forms and instructions do not state that income documentation is required or explain how to provide such documentation – cash earners are not issued W-2 forms or the like – nor is there a clear legal standard as to what constitutes sufficient documentation.
 
Accordingly, New York Appleseed recommends, among other things, the establishment of a clear and specific standard for minimum documentation; the publication and distribution of clearer instructions and guidance; and the elimination of all auditing targets related to the EIC. Noting the importance of financial literacy materials as a remedial tool, the report also shows that cash earners confront the same challenges affecting other EIC claimants, including limited understanding of the tax system, limited fluency in English, and limited access to low-cost tax preparation services.
 
For more information, contact David Tipson at 212.848.5468 or dtipson@appleseednetwork.org.

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