NH Earned Income Tax Credit

During the month of May, 2004, the Family Resource Management Program of the University of New Hampshire Cooperative Extension conducted a study on the use of the Earned Income Tax Credit (EITC), a tax benefit available to low and moderate income workers. Since previous research has indicated that many eligible families are not claiming this tax credit, the study was conducted to find out the extent to which eligible New Hampshire families are claiming the EITC, the strengths and barriers of the application process, and how that process could be facilitated for those in need.

Methods and Sample

Six (6) focus groups were conducted over a two-week period in different New Hampshire towns, including Manchester, Gorham, Claremont, Franklin, Dover, and Laconia. These locations represented metropolitan, non-metropolitan, and rural areas of the state. Focus groups were conducted at locations convenient for the target population, such as community centers and agency conference rooms. Each session was facilitated by Valerie Long of the Cooperative Extension, who had more than twenty years of experience conducting focus groups. The interviewer asked a series of fourteen (14) questions (see Appendix A) to provide a framework for specific information desired but also to facilitate open discussion and allow emergent themes to arise. The questions explored knowledge, perceived benefits, and use of EITC and AEITC, use of tax preparers, barriers to applying, ideas about how to disseminate information about EITC and how to improve the ease of the application process through types of assistance and possible help sites. General questions were asked regarding their experience and/or problems with applying for EITC, as well as feedback on existing brochures and new prototypes. Participants were also asked if they would be agreeable to future contact if more information was sought. Each session lasted for approximately 75 minutes and was attended by an average of 6 participants (please see Appendix B for breakdown by group). Sessions were audio taped and notes were taken for later analysis. Responses to each of the questions from all groups were then consolidated and analyzed. All tape recordings were transcribed to check for any additional information from participants.

Participants were recruited by the UNH Cooperative Extension staffs who work with low and moderate income working clients. A total of forty (40) subjects participated in this study. Twenty-five percent (25%) were between 18 and 24 years of age; 50% were between 25 and 35 years; 17.5% were between 36-45 years; and 7.5% were between 46-55 years of age. Eighty-five percent (85%) of the sample were female and the vast majority were white (95%), reflecting the demographics of lower income persons in New Hampshire.

The nature and purpose of the study was explained to all participants and after being informed of their rights, each signed an informed consent form. Subjects were assured of anonymity and confidentiality of data. Sessions were conducted in a comfortable setting with child care provided if needed and snacks provided. Each subject received a $20 gift certificate from Wal-Mart, as well as educational materials from the UNH Cooperative Extension. Further benefits afforded to participants included the opportunity to learn more about EITC and to have the opportunity to give feedback and input on a program that directly affects them.

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Knowledge and Use of EITC

Most of the sample had heard of EITC and in fact, 73%(29) had received it this year. On the other hand, while most had a general understanding of what it was; ie, that you had to work to get it and that there were certain qualifications, many did not know the specifics. Four of the groups seemed to have some knowledge about it, one group had fairly good knowledge, and one group had little to no knowledge about it. This might be explained by the fact that of those who did apply and receive EITC, 59% had used a professional tax preparer. Many said they had only heard of EITC through their tax preparers or from relatives. Fifteen used H&R block, two used other professional preparers, one used AARP, two did it free through the IRS, eight people did their own taxes(two using the IRS website), and one had a relative do it.

When asked why they went to a tax preparer, there were sixteen(16) responses. Some were afraid of error(6), three said it was “easier” one said student loans had complicated her return, three felt it was faster, and three mentioned convenience and accessibility of preparers. It was mentioned that Wal-Mart and K-Mart have H&R Block during tax season. The costs ran from $20.00 to $280.00. Reports indicated that H&R Block costs between $80 and $100 per person but others reported they had paid $107.50 or $130.00 for rapid refund. It appears that most eligible people prefer to have a professional do their tax returns and are willing to pay for that in order not to make errors and to receive their refunds promptly.

As far as barriers to applying, there was little response on this question since the majority had in fact applied. Out of five recorded responses, one didn’t know about EITC, two were unsure if they were eligible, and two said they were not eligible.

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Needs vs. Wants

Each focus group session began with a general discussion of what people would spend their money on if they had extra. While presented as a “fun” or “throw-away” question (which could be interpreted to mean how people would spend if all their needs were taken care of), the responses were interesting in light of how they later responded to how they actually spent the money they had received from EITC. On the first question there were 38 responses. About half reported that they would do enjoyable things such as shopping, going to the movies or out to eat, taking vacations, or buying brands they normally could not afford. The other 50% said they would save the money(5), spend it on their children(5), pay off bills, buy necessities ahead of time, start a business, or give to charity(2). When asked how they actually spent their refunds, there were 33 responses. Seventy-six(76%) said they had spent money on overdue bills, clothes, cars, back rent, back child support, paying back relatives, or savings. The other 24% said they had spent on vacations or doing fun things. This illustrates the precedence of more pragmatic concerns among most of the sample.

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Disseminating Information about EITC

Participants were asked for ideas about how to get information about EITC out to people. There were 52 responses to this question. Many people suggested using media outlets such as radio, television, and newspapers. Others thought that brochures/pamphlets/flyers should be made available at workplaces, welfare and other state agencies (such as CRC and NHES), libraries, and post offices. A few people suggested sending flyers home through the schools. Others felt that information should be mailed to welfare clients or that employers should mail information with paychecks and/or with W-2s. One person suggested that advertising and promotion should begin right after the Christmas holidays, while others felt people should get information periodically throughout the year. Other ideas included having large signs or posters in state agencies, using billboards, conducting information sessions, having a toll free telephone number publicized, and having videotapes made available at public libraries. Four other people mentioned that brochures should use very simple language to avoid confusion and one person suggested printing information in other languages but did not specify which languages. Finally, several people thought that posting information in locations such as day care centers, OB departments in hospitals, gas stations, and other places which are routinely frequented by large numbers of people would help reach even more eligible workers.

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Facilitating the EITC Application Process

Some suggestions for facilitating the application process included having an EITC web site, using libraries, having an IRS hotline with a direct line for EITC, having local VITA (Volunteer Income Tax Assistance) sites, having the IRS flag forms if someone is eligible and did not apply, and being able to apply at the workplace with people there to assist applicants. While some sensed that employers would not want to be involved with helping people do their taxes, others felt more could be done in the workplace. For example, information could be posted on bulletin boards or sent to employees with their W-2s, and that sessions could be conducted to help with the process. People could sign up for these and if they could not be attended during work hours, evenings, Saturdays, or lunch times would work. There seemed to be little concern expressed about confidentiality issues.

On the question of VITA sites, only three people said they had used one. They did this because of convenience of location. People want sites which are in good locations and afford privacy. Suggestions for possible sites were offered by each group.

The Manchester group said the Salvation Army or the Latin American Center. The Gorham group thought that Berlin and Gorham should both have sites, with some time during the day for stay-at-home mothers and hours for working people from 5:00 to 9:00 p.m. on week nights and Saturdays from 9:00 to noon. Group 3 also felt evenings (5:00 to 8:00 p.m.) and Saturday mornings plus 2 hours in the afternoon would be good with locations in the schools which are convenient for most people. The people in Group 4 did not mention specific locations but also wanted sites open seven days a week, both mornings and afternoons with hours of 8:00 to 12:00 on Saturday mornings and some time on Sunday afternoons. The Dover group mentioned having a site at the Dover Housing Authority or the EVEN Start Program or at local day care centers. They wanted week night hours after 5:00 p.m., perhaps on Fridays and Wednesdays, for example, as well as hours on Saturday and Sunday. Group 6 did not mention locations or times but suggested that libraries or community centers would be good sites.

On the question of libraries, most felt they would be a good idea but others felt that schools would be better. Some emphasized that they wanted privacy. Another person suggested a site at NHCTC where they have computer labs. Overall, concerns about sites were transportation, location, privacy, convenient hours, trained assistance available, and use of computers.

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Advance Earned Income Tax Credit

About 1/3 of participants had heard of Advance Earned Income Tax Credit but most did not know the specifics. None of the sample had received this. One had applied and was turned down. Suggestions on how to inform people about it included attaching information to pay stubs or with W-2s, employer seminars, informing people at time of hire, using employee bulletin boards, using posters with a tear-off form or using postcards to send in requesting information, and giving people a telephone number to call. Many felt that employers could be more active in this and that Human Resource departments could help. Others felt that human service agencies could do more; for example, “Those of us that are here know people….somehow involved with human services. You know, they meet with you a couple times a year, go over this stuff, another added thing but that could just be part of what is handed to you. It could be put in somebody’s hands rather than having to take it.”

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Input on New Brochures

Many participants expressed the idea that getting more money back should be emphasized. Several liked the “Get More Money in Your Paycheck” and “Make Tax Time Pay” statements. The consensus from all groups was that the color green on white was most desirable and three other people mentioned that the brochures should be more colorful, using neon colors, and/or glossy finish. At least three people mentioned specifically using green money instead of $1 or $5 bills. Many liked the hand holding dollars and felt it should be in color. Overall, participants wanted the brochures to use simple language, keeping the explanations as short and to the point as possible, perhaps using bullets instead of text, and highlighting income guidelines and eligibility criteria. As one person put it, “I just want something that tells me what I need to know!” It was mentioned that many people are visual learners. Four people mentioned using one brochure for both programs. One person suggested having it say “Get more in your paycheck AND get a tax refund too!” Some suggested not using the letters EITC but mentioning money savings up front to make things clear. Another comment on brochures was that they do not always work because people may not pick them up so they need to be made as attractive and/or as “eye-catching” as possible. Again, it was mentioned that employers and social service agencies (for example, through WIC or home visiting agencies) be more active in passing out information and that mailings with W-2s were appropriate.

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Other Input

Some participants mentioned that many people like to get money in a lump sum at the end of the year rather than throughout the year. Another person mentioned that in promoting the program, the emphasis should be put on getting more money for your children and how the money helps pay bills or eliminate disconnect notices. A few people would like to see the eligibility requirements change and one person mentioned that if you have more than two children, you still get the same amount. Others discussed how some people do not qualify but still have to struggle. Another idea expressed was that people would like to learn how to do their own taxes and felt that NHEP should train people to do this since they have computers. All participants consented to being contacted in the future for more input.

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Other Emergent Themes

Overall, the participants seemed comfortable in the sessions but it was difficult to know whether all subjects participated equally. In some groups, there seemed to be an attitude of being intimidated by government programs and regulations and somewhat distrustful of them. For others, there was a more demanding tone on what should be provided for them through VITA sites and other help in preparing taxes.

On the other hand, subjects were given a lot of specific information about both EITC and AEITC and much time was spent explaining answers to their questions; for example, the difference between the Child Tax Credit and EITC. Hopefully they will spread the word to others. They were also told that they could contact the group facilitator in the future had they any questions or concerns. One participant remarked, “We love doing this. If someone is coming here to listen to us, we know we’re going to be heard.”

Finally, the theme of wanting simplification of information and the application process came through in all group discussions.

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Conclusions

Most of the sample knew about EITC and about ¾ had received it this year but most did not know (or could not express) the specifics of the program and had only heard about it through tax preparers. Lack of knowledge could be a significant barrier to those who do not get professional assistance.
More than half (59%) had used a professional tax preparer because they wanted their returns done correctly and their refunds quickly. This is apt to cost more than some can afford.
Most spent their returns on necessities indicating that EITC could benefit people in paying pressing expenses, such as rent and children’s needs.
The majority (75%) did not know about AEITC and the consensus seemed to be that people prefer a lump sum rather than getting more in their paychecks. However, they should be made aware of this option as it might be more desirable for some to have larger paychecks throughout the year.
EITC information could be better disseminated through employers, social service agencies, and standard media outlets, but other heavily frequented places were also suggested, such as gas stations, day care centers, and hospitals. Sending out information with W-2s seemed the most popular option because people would be about to file their tax returns.
VITA sites were desirable with concerns regarding accessible locations, transportation, privacy, and convenient non-work hours, such as nights and weekends. Libraries, schools, and social service agencies were the most popular choices, especially if computers were available along with trained assistance. NHEP training through information sessions was also suggested since computers are available there.
Human Resource Departments might be a way to provide both information and possibly instruction for their employees. While this could raise confidentiality issues, there did not seem to be too much concern about that among subjects. Difficulties could arise for employers as to whether to provide this assistance during work or non-work hours or whether it is something they should be providing at all.
Participants suggested simple, direct, understandable instructions and clear eligibility criteria in brochures and flyers. The consensus was on combining EITC and AEITC into one brochure, avoiding too much text by using bullets, and emphasizing up front what the programs meant. Flyers and brochures should be “eye-catching” and attractive, using slogans such as “Get More Money in Your Paycheck” and “Make Tax Time Pay.” Green ink on white was favored.

Recommendations

Mailing simple, understandable information to employees with W-2s through Human Resource Departments and/or Payroll Services which many companies employ.
Providing information sessions through NHEP or Cooperative Extension
Promoting VITA sites in agencies, libraries, or schools with computers and trained assistance.
Including information on EITC and AEITC in LEAP instructional materials for later reference when people become employed.
Following up with sample one year from now to find out their experience in applying for EITC/AEITC.