Re­turn “can be sig­nif­i­cant”

The Denver Post - - BUSINESS - The Den­ver Post By Aldo Svaldi

Colorado tax­pay­ers could see an ex­tra $77 mil­lion, likely more, in their pock­ets this year be­cause of the re­turn of the state’s earned in­come tax credit fol­low­ing a 15year ab­sence.

“Even though it is much smaller than the fed­eral earned in­come tax credit, it can be very sig­nif­i­cant,” said Chaer Robert, pro­gram man­ager for the fam­ily eco­nomic se­cu­rity pro­gram at the Colorado Cen­ter on Law and Pol­icy.

The state credit is based on 10 per­cent of the fed­eral earned in­come tax credit claimed. In 2013, $772 mil­lion in fed­eral earned in­come cred­its went to 354,000 Colorado res­i­dents, ac­cord­ing to the Den­ver-based Pi­ton Foun­da­tion.

The credit’s ben­e­fits ac­crue the most to mar­ried house­holds with mul­ti­ple chil­dren. A mar­ried cou­ple with three kids, for ex­am­ple, could get up to $624 from the state, de­pend­ing on in­come. A qual­i­fy­ing sin­gle-filer with no chil­dren, by con­trast, can earn $50 at most.

The cred­its are based on a slid­ing scale and sub­ject to an in­come cap. A sin­gle par­ent with three kids must earn less than $47,747, while a mar­ried cou­ple fil­ing jointly with three chil­dren faces a phase­out at $53,267, ac­cord­ing to H&R Block.

Those ceil­ings, how­ever, aren’t that far re­moved from Colorado’s me­dian house­hold in­come, which is $58,433, ac­cord­ing to the U.S. Census Bureau.

“It sounds low, but it is a middle-in­come tax credit,” said Ali Mick­el­son, di­rec­tor of tax and leg­isla­tive pol­icy at the Colorado Fis­cal In­sti­tute.

That es­pe­cially ap­plies in poorer parts of the state.

Nearly a third of tax re­turns in Cone­jos and Cos­tilla coun­ties in 2013 claimed the fed­eral earned in­come tax credit, while only 8.1 per­cent of re­turns in Pitkin County and 6.4 per­cent in Dou­glas County did so.

Mick­el­son es­ti­mates about eight in 10 Colorado tax­pay­ers el­i­gi­ble for the fed­eral earned in­come tax credit ac­tu­ally take it.

Sev­eral groups, from ad­vo­cates for the poor to tax prepa­ra­tion firms, are try­ing to get the word out, es­pe­cially with the new tax fil­ing sea­son open­ing Jan. 19.

“Most tax­pay­ers will not know it is back un­less they get some

word of it,” said Brenda Scott, an en­rolled agent with Block Ad­vi­sors in Lit­tle­ton.

Tax fil­ers us­ing a soft­ware pro­gram, an on­line site or a pre­parer should get flagged about their el­i­gi­bil­ity to claim both the state and fed­eral cred­its.

One group that may be miss­ing out on the earned in­come tax credit are those who fail to file be­cause they are un­der the in­come thresh­olds for do­ing so. Those do­ing their own re­turns, who aren’t up to speed on the in­tri­ca­cies of the tax code, also may over­look the credit.

There are also tax­pay­ers who file a fed­eral tax re­turn but skip fil­ing their state re­turns, Scott said. They could be at risk of fore­go­ing a credit worth about 3 per­cent of in­come.

Sup­port­ers laud the fed­eral earned in­come tax credit, which dates back to 1975, as one of the most suc­cess­ful pro­grams ever de­vised to al­le­vi­ate poverty.

In 2013, the fed­eral cred­its lifted about 98,000 peo­ple in Colorado above the fed­eral poverty line, ac­cord­ing to the Pi­ton Foun­da­tion.

Colorado is among 27 states of­fer­ing a lo­cal ver­sion of the tax credit, but ini­tially it was avail­able only in years when the state is­sued re­funds un­der the Tax­payer’s Bill of Rights.

It went into hia­tus in 2001. But in 2013, state law­mak­ers made the state credit per­ma­nent when­ever it trig­gered next — as is hap­pen­ing now.

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