How United Way is breaking the cycle of poverty through tax refunds

 

 

For many people, filing income taxes can feel like an intimidating task. But low-income families and individuals face unique risks during tax time.

 

Many low- and middle-income working families qualify for tax credits, which can off-set taxes and increase income. However, as many as 20% don’t claim these credits because they don’t know about them – a huge missed opportunity. And since many low-income families may have fewer options near them to get their taxes filed, they may be more likely to overpay.

 

That’s why United Way supports free tax preparation services to help local people establish financial security. Through a partnership with local tax coalitions, the program helps low- and middle-income individuals and families file their taxes for free and take advantage of all the credits and refunds they qualify for.

 

Last year, the program’s IRS-trained volunteers filed nearly 18,000 tax returns for people in need across the region. The program helped local families receive more than $17 million in tax refunds. For those struggling to make ends meet, those savings can help cover basic needs and everyday expenses.  

 

Volunteers focus on spreading awareness about the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which are available to low- and middle-income individuals and families with children.

 

The average national EITC refund in 2019 was $2,504. By missing out on the CTC and EITC, families and individuals miss out on a sizeable boost in income that could significantly improve their lives, said Debbie Irwin, community economic development director at United Way of Greater St. Louis.

 

“For many low-income families, a tax refund is the largest amount of money they would receive at one time each year,” Irwin said. “It can bump people above the poverty level, improve outcomes for child well-being and help people become more self-sufficient.”

 

In 2018, refundable federal tax credits, including the EITC and CTC, lifted 7.9 million Americans out of poverty. Here are three ways people use tax credits to improve their lives:

 

 

Open new opportunities.

One program participant, Ms. J received more than $2,000 from the EITC. The extra income made it possible for her to continue attending college classes and earn a degree in accounting, making Ms. J. the first college graduate in her family.

 

With her degree, she found a higher wage job to support her and her daughter, and even volunteered in United Way’s tax preparation program, using her skills to help others as she had been helped. 

 

 

Invest in the future.

By boosting their income and investing in things like transportation, one of the top needs across the St. Louis region, people can make a big difference in their day-to-day lives, as well as their future.

 

“Sixty-four percent of families served in the program use their tax refunds to pay for basic needs and catch up on bills,” Irwin said. “Others may use that extra money to make a down payment on a car or pay for a car repair, which may make it possible for someone to be able to keep a job, or to take a job with a higher income that’s farther away.”

 

Program volunteers also encourage participants to save their refunds for emergencies, such as medical costs and home repairs, which could otherwise push people further into poverty.

 

“Saving money at tax time can help people avoid a financial crisis and smooth out bumps in the road during the rest of the year,” Irwin said. “Putting money aside in an emergency fund makes it less likely for families to need to reach out for assistance in the future.”

 

 

Set a child up for success.

For families with children, the extra income can go a long way. With more than 43% of households in the St. Louis region not making enough to afford basic needs, refunds can be used to reduce financial stress and give children a better quality of life.

 

Because of this, children whose families receive the EITC have greater opportunities to thrive. Research shows they’re more likely to graduate from high school, enter college and earn more as adults, setting them up for success.

 

“That money has the power to lift people out of poverty and improve the lives of children across our region,” Irwin said. “By investing in our neighbors’ financial stability, we’re making a worthy investment in the overall health of our community.”

 

 

Through free tax preparation services and other programs, your support of United Way helps local people break the cycle of poverty and build a brighter future. Learn more about how United Way promotes financial stability.

 

 

 

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Emily Becherer
Emily Becherer

Emily Becherer is a proud native St. Louisan, writer and lover of stories in all their forms. Faced with a captivating question, she will research her way down a rabbit hole and emerge with words that educate and inspire. You can probably find her taking in a musical, bingeing through a new podcast series, exploring the trails at local parks or curating her extensive library of Spotify playlists.