With the New Year just around the corner, many of us are working to finish projects and tie up loose ends before heading off on vacation. Congress just did the same. Before leaving for the year, Congress passed a $680 billion tax deal making a number of credits permanent, including improvements to the refundable Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) that were set to expire in 2017.
The CTC and EITC help keep low-income working Latino families out of poverty. Because of this legislation, about four million Latino working families, including nine million children, will not lose any of their tax credits. The EITC amounts to as much as $6,143 per family, while the CTC can add up to $1,000 per child. These credits are especially valuable to the Latino community because more than 40 percent of Latino workers earn poverty-level wages.
Even as we celebrate this victory, we are concerned by a number of restrictions targeting hardworking immigrant taxpayers. Some of these changes in the law will keep some from receiving credits and make it harder for other immigrants to access credits for which they are eligible. For example, anyone who receives a new Social Security number (SSN), regardless of immigration status, cannot claim the EITC retroactively (a process called “look-back”) after April 15, 2016. Most other filers remain eligible to claim their EITC for up to three previous years. The previous law allowed people with new SSNs to claim the EITC retroactively as well. Another change targeting immigrants is the fact that anyone who receives a new Individual Taxpayer Identification Number (ITIN) cannot claim the CTC or AOTC retroactively after April 15, 2016.
Other changes may result in challenges for immigrants that depend on an Individual Taxpayer Identification Number (ITIN) to pay taxes and receive credits available to workers. Some of these changes are based on guidance on the ITIN application process issued by the Internal Revenue Service in 2012. Since then, there has been a drop in ITIN applications, leaving some to wonder whether the guidance is making it too hard to get an ITIN. One of these changes includes the requirement for new ITIN recipients to reapply on a recurring basis to keep their ITIN. There are processing delays for ITIN applications under the current system; adding ITIN revalidation could worsen those delays and keep hardworking Latino immigrants from credits available to them.
The dedication and work of NCLR Affiliates and partners helped to successfully push for Congressional action to make tax credits for working families permanent. More work lies ahead to make sure the Latino community can maximize credits under the new law. The lead up to tax season offers the opportunity to make sure Latinos know their eligibility and how to claim credits successfully. There will also be a need to help ensure the new ITIN requirements are implemented fairly and effectively. To that end, the Latino community should be prepared to work with the Treasury Department on implementation. These and other efforts will help make sure now-permanent tax credits continue to make a difference in the lives of millions who are working but still struggling to get by.
For more information about the new tax package and its impact on Latinos read our new fact sheet—The Congressional Tax Package and Latinos: What You Need to Know.