Who Gets Credit? Understanding Family Barriers in Tax Credit Access

Tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are a major component of anti-poverty efforts in the US, offering families a cash infusion after they file their taxes. But not everyone in the US files taxes — many because they don’t meet the legal income filing threshold.

These low-income households make up a large portion of non- and irregular filers — individuals who don’t file taxes every year — and in doing so, miss out on tax credits for which they’re eligible.

Families are missing out on a critical social benefit program — one that could ease some of the financial stress these families are under. In order to understand more about who these families are, why they’re not filing, and what systems are in place to help these families access tax credits, the New Practice Lab conducted a scan of what we know works (and doesn’t) in the tax credits delivery landscape.

Here’s what we learned:

1. Families, especially lowest-income families, are missing out on thousands of dollars in taxes they already paid.
   Millions of families miss out on thousands of dollars in tax refunds and credits every year because they didn’t file taxes, oftentimes because they don’t have an income that meets the legal requirement to file.

   One in four children under 17 didn’t access the full Child Tax Credit (CTC) in 2023. One in five families eligible for the Earned Income Tax Credit (EITC) don’t claim it. This is concerning, given the potential cash amount families can receive: the average EITC received nationwide in 2022 was about $2,500 — and that’s just the federal credit.

   Combined with state credits, eligible families could get much more. For example, a qualified Maryland family with two children could get about $4,000 in federal and state EITC each year. That is enough to cover 2 months of child care costs in Baltimore City, according to calculations based on the Economic Policy Institute’s Family Budget Calculator.

2. Delivery matters: Tax refunds are a lifeline for families, but a myriad of barriers make them hard to access.
   Thirty-seven percent of taxpayers depend on their refunds to make ends meet, but many face structural, social, and psychological barriers to accessing credits. Compounding factors include a complex tax system, stigma and cultural norms that discourage seeking help, fear, and misconceptions about the filing process. Some can’t afford the filing fees — which could be up to $290 in out-of-pocket costs. Others simply don’t have the privilege to take time off work to file taxes, something that can take an average of 13 hours.

   We learned from previous work that filing taxes is intimidating and costly, especially for gig workers or for people who have not filed recently. Families who miss out on tax credits are more likely to live in poverty, be Hispanic or Black, single parents, immigrants, gender minorities, and people who live in rural areas. They’re also more likely to have income from self-employment or public assistance, and live within mixed-status or non-traditional family structures.

3. Access to tax refunds and credits improves low-income non-filers economic stability
   Easier access to tax credits can improve low-income non-filers' financial and social well-being. One in four of respondents in a national survey reported that the monthly payment of the Child Tax Credit made it easier for them to work more hours to earn additional income. As more groups access tax refunds, the positive impact multiplies, benefitting more families, communities, and the economy.

   Innovations that lower barriers — like targeted outreach or a simplified filing process — lift many up: the EITC is widely considered to be the largest need-tested antipoverty program nationwide. Long-term benefits include increased children’s educational attainment and higher workforce participation for mothers.

The New Practice Lab will continue to share learnings as we work to improve benefits deliveries for low-income non- and irregular-filers better.