Franklin County

Beshear touts federal income tax credit

FRANKFORT — Jaye Forsythe-Seward has used money from earned income tax credit refunds to help buy a new car and a new home. When her townhouse was flooded in 2006, it was money from her tax refund that helped her replace items in her waterlogged home.

A family member told the Lexington employment specialist about a free tax preparation site about 10 years ago. Staff there told her about the earned income tax credit.

"I was only getting $200 or $300 before," said Forsythe-Seward, who was recently married. "As a single mother, with the earned income tax credit, I sometimes get close to $1,300."

Unfortunately, about 20 percent of Kentuckians who qualify for the tax credit for moderate to low-income families don't claim it, said Gov. Steve Beshear on Monday at a news conference to remind people to claim the federal earned income tax credit.

Beshear said he wanted to raise awareness about the federal tax credit because the state has less money to help low-income residents. Beshear also encouraged people to use 200 free tax preparation sites in 90 Kentucky counties available to those who make less than $42,000 a year.

"Hundreds of thousands of Kentuckians are eligible for the earned income tax credit, or the EITC as it's called," Beshear said. "It has become one of our country's most significant anti-poverty tools."

A family of four with two children that makes less than $42,000 a year is eligible for the credit, which has a maximum refund of $4,824.

Beshear stressed that those free tax preparation sites do not open until mid to late-January.

The Kentucky Asset Success Initiative, part of a coalition of four groups that operates the free tax sites, served 6,817 families in 2008. Of those families, 2,203 families claimed the earned income tax credit and received a combined $2.9 million in returns because of the credit, according to information from the Kentucky Asset Success Initiative.

Many people don't claim the credit because paid tax preparers often charge customers to process additional deductions or credits, said Jennifer Weeber, coordinator for the Eastern Kentucky Asset Building Coalition.

But another benefit of the free tax preparation sites is the expedition of tax returns, said Terry Brooks, executive director of Kentucky Youth Advocates. Too many poor Kentuckians use refund-anticipation loans or loans given by commercial tax preparers based on the anticipated refund. Most people use them to get their tax returns on the same day they file, Brooks said.

"More people in Kentucky use rapid anticipation loans than in any other state in the country," Brooks said. According to a 2007 Brookings Institution and Kentucky Youth Advocates study, 84 percent of people making less than $20,000 paid for tax preparation to get the rapid anticipation loan. Fees for the loans can be as high as 20 percent.