NTA Weblog: Former Foster Youth and Homeless Youth Might Be Eligible to Declare the Earned Revenue Tax Credit score


The American Rescue Plan Act of 2021 (ARPA) amended IRC § 32 to acknowledge two new classes of taxpayers, “certified former foster youth” and “certified homeless youth.” These taxpayers could also be eligible to say the Earned Revenue Tax Credit score (EITC) if they don’t seem to be claiming a qualifying baby and are at the least 18 years previous. The minimal age for different taxpayers who aren’t claiming a qualifying baby to say the EITC is nineteen. There isn’t a minimal age for taxpayers who’re claiming a qualifying baby. The quantity of the credit score is dependent upon the quantity of their earned revenue and whether or not or not they’re submitting a joint return: the utmost quantity of the credit score is $1,502, which corresponds to earned revenue between $9,800 and $17,599 for joint filers, and to earned revenue between $9,800 and $11,649 for different filers. As I defined in an earlier weblog, certified former foster youth and certified homeless youth who meet the opposite necessities for EITC eligibility can declare the credit score by checking the field on line 27 on their 2021 tax returns. Like different taxpayers who declare the EITC in tax yr 2021, they might elect to make use of their tax yr 2019 revenue as a substitute of their 2021 revenue if their tax yr 2021 revenue is decrease than their 2019 revenue.

For this submitting season, certified former foster youth and certified homeless youth are more likely to be first-time filers, they usually may have free tax preparation help by means of, for instance, Volunteer Revenue Tax Help (VITA) applications.

The brand new ARPA provision will help youth who’ve “aged out” of the foster care system, i.e., those that have reached the utmost age at which a state will help them, akin to 18, and haven’t been reunited with their households or positioned in a everlasting house. When foster youth “age out” of the system, they’re legally emancipated and are not eligible to obtain state help with housing, meals, and medical care underneath the foster care system.

In accordance with the U.S. Division of Well being and Human Companies, greater than 20,000 youngsters exited the foster care system and have been emancipated in fiscal yr 2020. The Nationwide Foster Youth Institute notes that “[a]fter reaching the age of 18, 20 p.c of the kids who have been in foster care will change into immediately homeless.”

The brand new ARPA provision may even help unaccompanied youngsters or youth who’re homeless or who’re susceptible to homelessness and are self-supporting. The U.S. Division of Housing and City Growth estimates that on a single evening in January 2020, there have been 30,821 unaccompanied homeless youth between the ages of 18 and 24. One other 7,230 youth between the ages of 18 to 24 have been experiencing homelessness as dad and mom.

This ARPA provision is in impact just for tax yr 2021. Among the many Purple Guide Legislative Suggestions included with my 2021 Annual Report back to Congress, I really helpful that Congress completely increase the expiring age eligibility for the EITC to people who’ve attained age 18 within the case of certified former foster youth or certified homeless youth.

Taxpayers ought to file early and file electronically. To assert the EITC advantages the youth might want to test the field on line 27 of the tax return. If the field on line 27 will not be checked the IRS will deal with the claimed EITC as a math error and disallow it.

The taxpayer will then must correspond with the IRS to indicate she or he qualifies for the credit score, which is particularly tough for taxpayers who lack a everlasting deal with and can delay the cost of the refund. The delay in receiving the refund can be significantly burdensome for these taxpayers. Additionally, certified former foster youth and certified homeless youth ought to file electronically and file as early as they will.

Phrase of warning: If the IRS processes the return of one other taxpayer, akin to a former foster mum or dad, earlier than that of a professional former foster youth or certified homeless youth, and the opposite taxpayer claimed the EITC or one other tax profit with respect to the youth, the IRS will reject the youth’s return. The certified former foster youth or certified homeless youth will then must file a paper return to say the EITC.

As I’ve stated earlier than, paper is the IRS’s kryptonite – paper returns have been taking as much as eight months to course of.

These younger taxpayers, particularly those that are homeless, might not have a checking account the place the IRS can deposit their refund, they usually might not have a hard and fast deal with the place the IRS can ship a pay as you go debit card or a test. The IRS notes {that a} homeless shelter counts as a house, and taxpayers might be able to open a low-cost or no-cost checking account, or have a test or pay as you go debit card despatched to a trusted good friend or relative. These taxpayers are more likely to transfer continuously. Processing their returns and issuing their refunds must be speedy. Their expertise this submitting season might form their view of the IRS and tax administration.

TAS and the IRS grew to become conscious that one tax preparation software program, together with software program used at VITA websites, was not up to date to permit taxpayers to test the field on line 27 of Type 1040 till February 4. Previous to the up to date software program, customers weren’t capable of put together or file returns for taxpayers who’re eligible to test the field on line 27.

Suggestion: The IRS also needs to determine returns filed by 18-year-olds who didn’t test the field on line 27 and ship these taxpayers a letter to ask them whether or not they have been eligible to test the field, much like the discover the IRS sends to taxpayers who could also be eligible for the EITC however didn’t declare it on their return. Additionally, the IRS ought to preserve observe of the variety of taxpayers who test the field on line 27 of their returns. This might permit the IRS to raised perceive this inhabitants and higher serve these taxpayers sooner or later.

Submitting Season Tricks to Keep away from Processing Delays:

    • Make each effort to file your return electronically;
    • Present your financial institution routing info;
    • Request direct deposit in your refund; and
    • Triple test entries in your return for errors.

Errors or inconsistencies with IRS data will trigger delays in processing.


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