Exploring Barriers to Tax Credit Access
The New Practice Lab at New America has published a groundbreaking survey that sheds light on the alarming issue of tax credits remaining unclaimed by millions of families annually. According to the report released on May 20, 2025, many households are missing out on essential financial support due to a myriad of barriers that complicate the tax-credit claiming process.
The Importance of Tax Credits
Every year, millions of dollars in tax credits go unclaimed in the United States. Programs such as the Child Tax Credit and the Earned Income Tax Credit are crucial tools in combating poverty, providing vital cash support to low-income families. However, the survey reveals a disturbing trend: a significant number of eligible families are not accessing these benefits simply because they don’t know how.
Key Findings from the Survey
The New Practice Lab surveyed over 5,000 households to delve into the struggles families face when trying to claim tax credits. Here are some of the critical findings from the report:
1. Lack of Awareness
A staggering 36% of households earning less than $10,000 annually were unaware of any available tax credits. This rate is more than twice that of households earning above $150,000, where only 17% reported the same unawareness. This highlights a significant information gap that needs to be addressed to help low-income families take advantage of financial support.
2. Eligibility Misunderstanding
The survey found that a significant number of low-income households believed their income was too low to qualify for tax credits. One-third of those earning under $26,000 and who had not filed taxes in the past three years claimed they did not file as they thought they were ineligible. Yet, among these individuals, 20% had earned income and 37% had children—both factors that typically qualify individuals for tax credits.
3. Fear of Errors
Fear of making mistakes during the filing process is another major barrier. The report indicated that 61% of respondents who feared penalties for errors hadn’t filed taxes in the past three years. This anxiety not only keeps families from filing but also results in potentially losing out on available tax credits.
4. Costs Associated with Filing
The financial burden of filing taxes is also a significant hurdle for many families. Despite 36% of survey participants identifying cost as a barrier, many have used professional tax services due to the complexities involved in tax preparation. This reliance on professionals often results in additional financial strain, making it harder for families to access the support they deserve.
5. Document Collection Challenges
Gathering required documentation for tax filing proved to be another challenge. Half of the respondents reported difficulties in obtaining necessary documents. Of those who faced documentation issues, 80% struggled with more than one type of needed document, complicating their ability to file.
6. Disconnect with Government Services
Interestingly, the survey revealed that most low-income families are already connected with various government support services. However, many feel that tax credits operate separately and are not integrated with other forms of aid, making them appear less accessible.
Implications for Policy
These findings have significant implications for policymakers, particularly the state Departments of Revenue. To improve tax credit uptake, a multifaceted strategy is essential. This includes:
- - Enhanced awareness campaigns educating families about their eligibility for tax credits.
- - Streamlined filing processes to decrease the complexity involved in claiming credits.
- - Personalized outreach strategies to connect with families directly.
As discussions grow in the White House regarding increasing the Child Tax Credit, it is crucial for governments to not only look at expanding credits but also at how they can facilitate easier access for families.
Conclusion
The recent report from the New Practice Lab underlines the urgent need to address the barriers preventing low-income families from accessing critical tax credits. By rethinking and improving the delivery of tax services, we can ensure that fewer families are left behind in their quest for financial stability. The full report is available for those who wish to understand this pressing issue in greater detail.