Tax returns are used by the state government to send Californians money and the IRS has restrictive guidelines for determining who needs to file. Meaning even if you don’t owe, you may still have to submit a tax return.
In recent years filing your taxes has had a huge impact, the tax returns serve as a key to receiving money. In 2021 California started sending out its pandemic stimulus payments, which reached up to $1,200. To receive payment you had to have filed a 2020 tax return. The state distributed a second round of payments in late 2021, also predicated on having filed a 2020 return.
As gas hikes spike in 2022, a massive budget surplus by the state lawmakers decided to send out another round of payments to help with the rising cost of living and again tied to 2020 tax returns. It’s not just one-time pandemic payments but there are also yearly payments, called refundable tax credits, that provide thousands of dollars to lower-income people through the tax system.
But sadly some of the eligible recipients for those programs earn little enough that they don’t owe any taxes leading them to not file a tax return. No tax application means they can’t collect what is essentially free money on the table.
California Income Tax Credit
California helps their resident financially by offering money in the form of a tax system. These refunds are not just one-time pandemic payments. There are also annual payments, called refundable tax credits, that produce thousands of funds for people with lowe-income which will identify through the tax system.
Despite all the money offers, lots of people don’t file their taxes and miss the free money. It’s difficult to identify exactly how many people are in these circumstances. According to the US Department of Health and Human Services, around one-fifth of the population who are eligible for the federal earned income tax credit don’t receive it. A Researcher found that looked at those California households who are eligible for CalEITC, they found that about 400,000 households that qualified for credit didn’t receive it, largely due to low-income families not filing taxes.
In 2020, Berkeley researchers collaborated with California state agencies to research whether small “nudges” including sending text messages and letters with information about the tax credits but the nudges had no effect. However, another approach was slightly more successful. Researchers reached out to households with emails and voicemails explaining they could get stimulus payments and directing them to a simplified filing tool designed by Code for America, but the largest boost was only from 0.43% to 2.4%.
Lastly, filing a tax is important because it allows you to obtain a tax refund offer from the government. File your taxes with confidence at Free File webpage on the irs.gov website.