It's a Thursday night in April and eight people are waiting in a basement room in the Martin Luther King, Jr. Public Library in Washington, DC. Most are carrying small stacks of papers, pay stubs and tax booklets.

One woman rocks a small child in her arms. It's 8:00, past the young boy's bedtime but his mother kept him up late so she could get free help filing her taxes, which can get complicated because she—like most of the people in the room—claims an Earned Tax Income Credit, or EITC. And she can't afford to pay a tax agency to help her.

In libraries, shopping malls, community centers and other public places across the country, Volunteer Income Tax Assistance (VITA) and similar programs offer free tax preparation to low- and moderate-income families. VITA volunteers are trained by the IRS, and can help families who are eligible for the EITC.

The EITC—sometimes called the earned income credit, or EIC—uses the tax system to help workers get back some or all of the income tax withheld during the year. Some families are even eligible to receive more money from the IRS than they owe in taxes. It was created by Republican President Gerald Ford in the 1970s and expanded in the early 1990s. It was expanded again in early 2009 to cover larger families for tax years 2009 and 2010 (President Obama's fiscal year 2010 budget proposal would make this expansion permanent).

And it really works. It’s widely recognized as one of the most effective antipoverty program for working families. Some 23 million households accessed the EITC in 2006 (the latest year for which data are available), and the program now lifts more than 4 million people, more than half of them children, out of poverty each year, according to the Urban Institute and the Center on Budget and Policy Priorities (CBPP).

It's a popular program, one of the few anti-poverty supports with bipartisan backing.

What about the Recession?
In addition to the federal EITC, 24 states offer their own EITCs.

During this recession, the EITC has many benefits: studies show it encourages work and asset building, and recipients tend to use EITC benefits to pay off loans or invest in education. Another plus for states: it’s easy—it adds only one line to the state income tax form and costs very little to administer.

Who’s Eligible?
Working families with children whose annual incomes are below about $34,000 to $41,000 (depending on marital status and the number of children in the family) generally qualify. So do workers without children whose incomes are below about $13,000, according to CBPP.

"But it's not just for your own children," says John Wancheck, CBPP’s EITC Campaign Coordinator. "A grandparent who's raising a grandchild can get it, foster parents can claim it. And so can people caring for a dependent child or adult who's disabled."

Research shows that most people who are eligible for the EITC do take advantage of it, nearly 80 percent. But a significant number don't, for all the reasons you might expect.

"Some of the problem may simply be that people are not aware that they're eligible," says Wancheck. "Some may be new to employment or new parents and not familiar with doing tax returns. Tax instructions and forms are available only in English, so there may also be language barriers. Some communities have high populations of homeless working families, and they may be suspicious of doing tax returns or have trouble getting documentation from employers."

Programs like VITA are working to spread the word about the EIC, and help people fill out the forms it takes to claim it—all for free.

Wendy, a single mother living in suburban Virginia who asked that her last name be withheld, learned about the EIC from a colleague who had gone to a VITA volunteer for help preparing taxes. In 200, she and her then 5-year-old daughter were eligible to get back more than $500—money she used to offset the costs of child care, rent and groceries. "It really makes a big difference," she says. "Any little bit helps because raising a child is not easy, no matter what you make."

For More Information

• Think you might be eligible for the EIC? Check out the IRS toolkit page.

• You can also call the IRS hotline at 1-800-TAX-1040 or check out the free IRS tax prep site, and get more information about VITA and the credit for this tax season or the next.

• The Center on Budget Policy and Priorities Earned Income Tax Credit pages. Be sure to check out the Outreach Kit.

• The Urban Institute has a Recession and EITC toolkit page.

• Visit the Connect for Kids Family Income topic pages, where you’ll find the latest Employer Guide to the EITC among many other resources.

• Related: Making Care Less Taxing: Improving State Child and Dependent Care Tax Provisions (National Women’s Law Center)

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This article was originally written for and published on Connect for Kids in 2000 (click here) and was updated in April 2009.