Earned Income Tax Credit made easy

State streamlines process to claim tax break for workers making up to $56K

Workers who successfully apply for the federal Earned Income Tax Credit will automatically be enrolled in a parallel state program in a new initiative launched by the Pritzker administration. (Shutterstock)

By Ted Cox

The state is streamlining the enrollment process for low-wage workers to claim a significant tax break.

The Pritzker administration and the Illinois Department of Revenue announced basically that anyone successfully applying for the Earned Income Tax Credit on a federal return would automatically be enrolled in the state version, technically known as the Earned Income Credit. According to the department, many workers were filing for the federal version without taking advantage of the parallel state program.

The EITC grows out of a proposal for a “negative income tax” first proposed 50 years ago by conservative economist Milton Friedman. It basically gives low-wage working families a rebate on their federal taxes, and it’s been expanded over the years to other low-wage workers.

“By rewarding work and supplementing household income, Earned Income Tax Credit programs have lifted millions of families and children out of poverty across the country," said David Harris, director of the Department of Revenue. "Today's action continues this administration's efforts to ensure all Illinois working families are receiving the support they have earned and this department's efforts to connect taxpayers to the maximum refunds they are due.”

According to the department: “Most households are eligible for the federal EITC if they earn less than $55,952. The Illinois EIC is a refundable tax credit automatically available to federally eligible households and is worth up to 18 percent of a taxpayer's federal claim. In 2020, an eligible Illinois household could be due a refund of up to $1,157.  By failing to file for this powerful credit, these targeted households are leaving more than an estimated $10 million dollars unclaimed.” It adds that “federally, eligible families with three or more qualifying children could get a maximum credit of up to $6,557. EITC for people without children could mean up to $529 added to their tax refund.”

The department advises that “targeted taxpayers will receive a letter confirming their eligibility, estimating a refund amount, and instructing them how to finalize their claim.” It also urges more taxpayers to explore whether they qualify for the federal EITC program, as the Internal Revenue Service estimates “nationwide that only four out of five eligible households claim the federal credit which means tens of thousands more Illinoisans are missing out on this powerful tool.”

A nonpartisan alliance of nonprofit advocacy organizations and community leaders known as the Illinois Cost of Living Refund Coalition immediately praised the move.

“With this initiative, Gov. Pritzker and the Illinois Department of Revenue are making a complicated tax structure more accessible through clear communication.”

Harish Patel of Economic Security for Illinois (One Illinois/Ted Cox)

“Too many Illinois households are too close to poverty,” said Harish Patel, director of Economic Security for Illinois, which has been advocating expansion of the program to still more low-wage and middle-income workers. “Policymakers must act decisively to attend urgent economic instability and to build a stronger, more resilient middle class. With this initiative, Gov. Pritzker and the Illinois Department of Revenue are making a complicated tax structure more accessible through clear communication. We applaud this initiative; it’s good governance in a time of great need.”

Kim Drew, legislative advocacy director at Heartland Alliance, said, “We know that the Earned Income Credit is a proven antipoverty solution and a vital source of income that keeps Illinois families afloat. The EIC is a tax credit that targets relief to working families who need it most. We have more work to do to ensure all Illinoisans, including immigrants, caregivers, and older adults, are able to receive the EIC. We hope that this is the first of many steps the state will take to strengthen the EIC so it reaches more Illinois families.”

“Even before the pandemic, the economic foundation holding up many Illinois households was crumbling,” said Meegan Dugan Bassett, Chicago fellow at New America. “Since the pandemic started, money is even more scarce, particularly for families of color. To recover from the pandemic, families across the state will need support from our state leaders. Data show that these types of Earned Income Tax Credits are one of the best poverty solutions out there. Plus, most families use them for basic needs, putting money back into the local economy. Making it easier for families to receive the EIC is a smart policy, and we applaud it.”