WASHINGTON

TAXES have long been a polarizing force in U.S. politics. Unfortunately, in recent years, they have not only formed a distinction between political parties; they are also furthering the distinction between the social classes. We are seeing more and more tax breaks for the rich, which they aid in further crippling the middle- and lower-income brackets. What many don’t know is that there is some relief for those who lose out during tax season, even though they make much less.

This break is known as the Earned Income Tax Credit (EITC).

The IRS explains EITC as “a refundable federal income-tax credit for low-income working individuals and families. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.” According to the Children’s Defense Fund, “The EITC, which can be worth up to $4,400, lets workers use their refunds to cover such expenses as rent, utilities, food and child care, thereby improving their families’ lives while directly reducing poverty levels.”

EITC helped 4.9 million people, including 2.7 million children, escape poverty in 2002. The credit brought over $36 billion in benefits to more than 20 million low- and moderate-income workers.

Another bonus of EITC is that the money returned does not affect the benefits of the EITC recipient. This means it isn’t used to determine the eligibility for Supplemental Security Income (SSI), Food Stamps, low-income housing, Temporary Assistance for Needy Families (TANF), Medicaid, etc. Immigrant workers, using income taxpayer identification numbers (ITINS) to file, can also qualify for EITC without fear, as the IRS rarely shares its information with immigration officials.

Of course, an opportunity like this doesn’t come without pitfalls. Scoundrels seeking to prey on the poor have found EITC an opportunity to take advantage of those unfamiliar with the tax system or their rights. With the rising popularity of and need for EITC, some tax preparers have grasped the opportunity to swindle those desperate for the extra cash.

Enter “rapid-refund loans,” which are distributed through Rapid Access Loans (RALs).

Through this vehicle, similar to “payday loans,” companies advance money based on the worker’s anticipated income-tax refund, and the loan is repaid once the Internal Revenue Service issues the refund. Unfortunately, like payday loans, rapid-refund loans come at high cost, often charging the recipient a rate as high as 250 percent, according to a study done in 2002 by the Brookings Institution.

The Brookings report, called “The Price of Paying Taxes: How Tax Preparation and Refund Loan Fees Erode the Benefits of the EITC,” analyzed the distribution of federal earned-income tax filers and their use of “rapid-refund loans” in the nation’s 100 largest metropolitan areas. It found that over $2 billion in EITC refunds nationwide were spent paying for “rapid-refund loans.” The report also noted that in metropolitan areas where there were the highest number of EITC recipients, clusters of unsavory tax preparers were also found.

In the report Bruce Katz, executive director of the Brookings Institute states, “The EITC is the federal government’s most successful anti-poverty program. Yet too many EITC dollars are rewarding tax preparers and affiliated lenders, instead of rewarding working families.” It is important that EITC remains a positive avenue for those who qualify to receive money that will aid them in their climb out of poverty.

While there are always those who will try to profit from those in need, there are ways to receive help in filing taxes that won’t cost money or cause further disenfranchisement. The IRS offers the Volunteer Income Tax Assessment program (VITA), in which volunteers do taxes for low- to moderate-income applicants.

To find the VITA site near you, call 1-800-829-1040.

Ellie Hurley is the communications coordinator for World Hunger Year ( www.worldhungeryear.org). This piece is run in cooperation with minutemanmedia.org, which originated it.