The following piece is co-authored by Bob Annibale, Global Director of Citi Community Development, and Julie Menin, Commissioner of the New York City Department of Consumer Affairs.
Lisa lives with her parents and two siblings in a public housing development in Astoria, Queens. A 25-year-old college graduate, she earns $17.50 an hour working full-time as a concierge for a property management company. Despite her hard-work, Lisa fell behind on her student loan payments and several other bills after a period of unemployment, badly damaging her credit score and deepening her debt.
With Tax Day now behind us, it's time to recognize Lisa and the thousands of New Yorkers who are now on their way to building a healthier financial future and identity, thanks to one of the nation's most successful anti-poverty measures -- the Earned Income Tax Credit.
While some people may not associate tax season with improving a family's bottom line, for more than 28 million Americans, the Earned Income Tax Credit (EITC) does just that. The EITC is a refundable tax credit that provides low-and moderate-income working households with significant refunds. In fact, the average refund in New York City is around $2,500. By combining the EITC with other credits, some local families can receive up to $10,000, which is often the largest lump sum they will see during the year.
Each year, the EITC offers a vital cash infusion for an increasing number of working families and it enables them to purchase much-needed household goods, make home improvements and buy any other necessities -- resulting in a welcome boost to local economies. The credit is also often used to pay down debts or begin saving for the future, and it has been shown to improve outcomes for the health and school performance of children. In 2013, the EITC was credited with helping lift nearly 6.2 million people out of poverty, more than half of whom were children.
But it's not just about the additional income.
Most low-income households may not be able to afford access to a financial expert they can talk to about getting out of debt, choosing safe banking products and services or planning for the future. So, many families continue to struggle from paycheck to paycheck, paying too much to gain access to their own money. But when eligible New Yorkers visit one of the free Volunteer Income Tax Assistance (VITA) sites around the city to take advantage of free tax preparation services and claim their EITC refund, they are also gaining access to a suite of services, like one-on-one financial counseling, to help them make sound financial decisions, open a savings account, improve their credit and work towards building a strong financial identity.
That is why this year, New York City's Department of Consumer Affairs (DCA) rolled out the largest EITC outreach and awareness effort in the City's history. DCA's advertising campaign was five times larger than anything that was done before, and it included ads in subway cars and bus shelters, handouts and posters for communities and a January phone-a-thon in which more than 2,000 volunteers spread the word to approximately 270,000 fellow New Yorkers. The campaign was paired with support from Citi to expand the capacity of the free tax prep sites, enabling them to accommodate the increased demand.
We are pleased to report that the campaign was a resounding success. This year, approximately 150,000 low income New Yorkers filed their taxes at one of the free VITA sites -- a 50 percent increase from last year and the highest number of filers since campaign began in 2002. We estimate helped put nearly $250 million in savings and EITC refunds into the pockets of hard-working families and expanded access to vital financial planning and other additional services for tens of thousands of households who might otherwise have missed out.
Lisa is just one of the many New Yorkers who has benefited. She took advantage of free tax prep services at her local VITA site, where an IRS-trained volunteer tax professional prepared and filed her return for free. Through the EITC refund, Lisa was able to pay down her student debt and then worked with a financial counselor to create a repayment plan for her bills, establish a savings plan, and start repairing her credit. Just one year later, Lisa's credit score has improved dramatically and she has been able to increase her savings. We want to make sure Lisa's story is repeated all over New York, and that everyone who is eligible gets the tax credits they have earned and the financial services they need.
To find out if you qualify for the Earned Income Tax Credit, visit NYC.gov/TaxPrep or call 311. You can also download an easy-to-use guide with information on claiming EITC at http://citicommunitydevelopment.com/MoneyMatters.
Bob Annibale is Global Director of Citi Community Development. Julie Menin is Commissioner of the New York City Department of Consumer Affairs.