Business & Economy

Why LA County wants poor residents to file their taxes

The top of a form 1040 individual income tax return.
The top of a form 1040 individual income tax return.
Tim Boyle/Getty Images

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Los Angeles resident Sandy Kwon did not file taxes last year because she only made only around $6,000 – well below the minimum amount required to file.

“My income wasn’t much, so I just let it go," said Kwon, who said she is in her late 50s and has rarely been able to work because of health issues.

But last fall Kwon visited a tax preparation center for low-income residents in Koreatown and found out she was missing out the Federal Earned Income Tax Credit (EITC). She filed a return in November, and received almost a thousand dollars. She got the credit again this year when she filed her 2015 taxes.

"To me it's a big help," said Kwon. “It helped get me food and other things.”

Many L.A. county residents are leaving money on the table by not filing taxes – $370 million a year – according to Supervisor Sheila Kuehl, who cited statistics from the New America Foundation.

On Tuesday, the Los Angeles County Board of Supervisors voted to establish a Center for Financial Empowerment to help low-income residents file taxes and open bank accounts instead of payday lenders, which charge sky-high interest rates.

"The Center for Financial Empowerment will be able to help tens of thousands of low income L.A. households take a step up on the ladder of American economic mobility by helping them build household wealth and resilience," said Kuehl, who co-authored the motion along with Supervisor Hilda Solis.

The center will have a first year budget of $570,000, drawing from funds from the county's Department of Consumer and Business Affairs. The program is also getting funding from Citi Community Development. It will help coordinate efforts with existing low-income tax centers such as the one Kwon visited, at the Koreatown Youth + Community Center.

Seattle, New York and San Francisco already have similar programs. San Francisco's has helped more than 75,000 residents who don't have access to traditional banks open affordable bank accounts through the Bank On San Francisco program, according to the Los Angeles County Economic Development Corporation. 

Fifteen percent of L.A. County residents live below the official poverty line, but nearly half are defined as "liquid asset poor,” meaning they wouldn't have enough savings to live above the poverty level for three months if they lost a job had another kind of financial emergency.

Single residents that make less than $15,000 per year qualify for a $500 federal credit. A resident with one dependent, making less than $39,000 per year qualifies for $3359. A family of four or more that makes less than 48,000 would receive $6242 in the federal credit. 

In addition to the federal EITC, California now has a state EITC, with lower income requirements. The state set aside $370 million for the program. More than 100,000 households in Los Angeles county qualify for the state EITC, according to a coalition that promoted the credit.