This year more than ever, families need a large tax refund to get by. In a normal year, tens of millions of families count on their Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) to provide a vital financial infusion to their households. Widespread unemployment in 2020 and 2021 threatens this financial lifeline for millions of families.
Commonwealth analysis showed that in the fall of 2020, at least 2 million families were on track to receive significantly lower refunds in 2021–up to 80% smaller than typical. Families of color would have been disproportionately impacted, reflecting the structural inequities the pandemic has further exposed and exacerbated.
Fortunately, Congress included a “lookback” provision in the relief package that passed December 21st, which helps boost some filers’ tax refunds up to amounts similar to those they received in the 2020 tax season. While the policy solution is in place, our north star is to ensure every eligible person benefits from the lookback.
To help organizations that serve low-income families, we hosted Tax Time 2021: What we know about the ‘lookback’ and how organizations can act on it to support low-income families, a webinar moderated by Jason Ewas, Senior Innovation Manager at Commonwealth, and featured Nina Olson, Executive Director of the Center for Taxpayer Rights; Annelise Grimm, Associate Program Director, Code for America; and Alan Gentle, Manager of the Roxbury Center for Financial Empowerment for the City of Boston.
The discussion provided resources, communication strategies, and insights into how to apply Congress’ lookback provision. Here are three key takeaways from the webinar:
1. Simplify your messaging.
“Saying ‘earned income’ means nothing to most taxpayers. You have to say, ‘What’s your W-2? What do your pay stubs from 2019 say? Did you get any 1099s from 2019? Use really common language,” said Olsen, a former national taxpayer advocate.
Commonwealth conducted a survey in partnership with SaverLife to identify the clearest messages to engage tax filers who could benefit from the 2019 lookback. The survey was completed by 341 respondents, 189 of whom reported making less than $30,000 in 2020. Survey responses were grouped into audience segments based on income level and change in income from 2019 to 2020 to identify optimal messaging for core audiences.
Six message frames were tested—three ‘aspirational’ and three ‘educational.’ Results showed educational messaging outperformed aspirational messaging across all audience segments. However, certain aspirational messaging performed well among some segments. Below are some sample messages across different platforms. You can download a complete guide with exactly what to say for maximum results with your clients.
Text Message, Facebook, and LinkedIn: Did you earn less in 2020? You could qualify for a larger tax refund! or If you do this one thing, you could get a bigger tax refund this year.
Twitter: Did you earn less in 2020? You could qualify for a larger tax refund! Congress just approved a new ‘lookback rule’ which means you can use either your 2019 or 2020 income on your taxes to get the largest refund possible this year.
Email Copy: (Subject Line) You could qualify for a larger tax refund!
As part of the latest COVID-19 stimulus package, Congress passed a new ‘lookback rule’ which means if you earned less in 2020, you could use either your 2019 or 2020 income on your taxes—whichever one gets you the most money back.
Every dollar counts—but you have to file your taxes to get the most of your hard-earned dollars back in your pocket. Have your 2019 tax return available when you do your taxes this year to make it easier.
Start the year with a boost and save for the future. Be sure to file your taxes, use the ‘lookback rule’, and don’t miss out on a potentially bigger refund!
2. Understand the lookback provision.
For filers who earned less in 2020 than in 2019, they can use their 2019 or 2020 earned income to calculate their EITC and ACTC.
Tax filers should have their 2019 earned income ready when filing. “Documents are the biggest hurdle,” said Grimm. To combat this problem Code for America created a team of volunteers called greeters to follow up with filers who are missing documents to help complete the process by offering encouragement and resources such as reaching out to past preparers to retrieve last year’s return.
Tax preparers, including tax filers filing their own taxes, should test which year’s earned income (from 2019 or 2020) will get them the bigger tax refund. If 2019 income gets the filer the bigger tax refund, they should follow steps on their tax forms for using their 2019 income. Gentle recommended referencing IRS publications to better understand eligibility, such as publications 596 and 972.
3. Plan ahead for potential roadblocks.
While advancements in equity and access abound, it’s important to be aware of the obstacles fillers face and foresee challenges. When planning outreach services, please consider adding translation and interpreter services. If there are collection, audit, or back tax issues, refer the client to a low-income tax clinic in your community. Here is a link to IRS Volunteer Income Tax Assistance (VITA) locations.
One obstacle filers face is psychological. Divorce, death of a close family member, shifting caregiving responsibilities, impacts from the COVID-19 pandemic all come up during the tax filing process. Grimm said, “Putting all that down on paper in a tax return can actually be a pretty traumatizing experience so the process needs to be trauma-informed.” Here’s more information about how to conduct yourself with sensitivity.
Finally, use your resources. Visit TaxTimeCrisis.org for news, tools, and resources about tax refunds, the lookback rule, and tax credits, including the Earned Income Tax Credit. Visit Code for America’s GetYourRefund.org for free, accessible help filing and get the biggest refund possible this tax season.