Income Tax Time as a Time to Build Financial Capability
Income Tax Time as a Time to Build Financial Capability
After filing a federal income tax return, many low- to moderate-income working families receive lump sum refunds equal to one, two, or more months of earnings. This chapter introduces those interested in advancing financial capability to the income tax system and presents some new research about tax-filers’ experiences. Empirical results are based on interviews with 38 clients of a community-based volunteer tax preparation service. Respondents approach tax season with generally accurate ideas about the likelihood and size of refunds. The reasoning behind these predictions is based on both broad stroke understandings of tax rules as well as ideas of citizenship and deservedness. Practitioners are urged to be aware of the importance of income tax refunds, help their constituents avoid unsettling filing surprises, and work toward commercial firm practices and public policy that support financial capability at tax time.
Keywords: tax credit, tax refund, financial capability, income tax
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