In recent years, a significant number of Connecticut families have inadvertently forfeited substantial tax benefits, amounting to approximately $120 million. This issue has prompted various organizations to intensify efforts to ensure eligible families receive the financial support they are entitled to.
Unclaimed Tax Benefits in Connecticut
An estimated 45,000 low-income families in Connecticut failed to claim their full federal income tax benefits in the 2021 tax year, resulting in a collective loss of about $120 million. This shortfall primarily stems from unclaimed federal credits such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), which are designed to provide financial relief to working families.
Factors Contributing to Unclaimed Benefits
Several factors contribute to the underutilization of these tax credits:
- Lack of Awareness: Many eligible families are unaware of the credits available to them or the eligibility criteria.
- Complex Tax Filing Process: The intricacies of tax forms and filing requirements can deter individuals from claiming these benefits.
- Limited Access to Tax Preparation Services: Low-income families may lack access to affordable or free tax preparation assistance, leading to missed opportunities to claim credits.
Efforts to Address the Issue
In response to this significant loss of potential income for families, organizations like the United Way of Connecticut and SimplifyCT have launched initiatives to provide free tax preparation services and educate families about available tax credits. These efforts aim to ensure that eligible families can claim the benefits they deserve, thereby improving their financial stability.
Impact on Families and the Economy
The unclaimed $120 million represents not only a loss for individual families but also a missed opportunity for economic stimulation within local communities. When families receive these credits, they are more likely to spend the funds on essential goods and services, thereby supporting local businesses and contributing to economic growth.
| Tax Credit | Maximum Benefit per Family | Income Eligibility Threshold (Single Filers) | Income Eligibility Threshold (Joint Filers) | Refundable Portion |
|---|---|---|---|---|
| Earned Income Tax Credit (EITC) | Up to $6,000 | Varies based on number of children and filing status | Varies based on number of children and filing status | Yes |
| Child Tax Credit (CTC) | Up to $2,000 per child | Up to $200,000 | Up to $400,000 | Partially |
| Additional Child Tax Credit (ACTC) | Up to $1,400 per child | Same as CTC | Same as CTC | Yes |
| State Earned Income Tax Credit (CT EITC) | 40% of federal EITC amount | Same as federal EITC | Same as federal EITC | Yes |
The forfeiture of substantial tax benefits by thousands of Connecticut families underscores the need for increased awareness and accessible tax preparation services. By addressing these challenges, organizations and policymakers can help ensure that eligible families receive the financial support intended for them, thereby enhancing their economic well-being and contributing to the overall prosperity of the community.
