How does the federal tax system affect low-income households? Q.How does the federal tax system affect low-income households? A.Most low-income households do not pay federal income taxes, typically because they owe no tax (as their income is lower than the standard deduction) or because tax credits offset the tax they would owe. Some receive substantial rebates via refundable tax credits. However, nearly all low-income workers are subject to the payroll tax. Read more about How does the federal tax system affect low-income households?
Why do low-income families use tax preparers? Q.Why do low-income families use tax preparers? A.Many low-income families owe no income tax but still must file a tax return to receive refundable tax credits, including the earned income tax credit. Those who do file often seek help, which nearly always comes from a paid preparer. The cost of that help erodes the net value of refundable credits. That cost might be worth bearing if preparers helped their clients claim tax benefits that otherwise might be missed, but many don’t. Read more about Why do low-income families use tax preparers?
How do IRS audits affect low-income families? Q.How do IRS audits affect low-income families? A.The IRS audits a disproportionate (but still small) share of tax returns that include EITC claims. The agency has found that average discrepancies between taxes owed and taxes paid are smaller on EITC returns than on all returns. Read more about How do IRS audits affect low-income families?
