Caregiver Training

Tax Filing & Tax Credit Resources

May 3, 2023

Needed! Adult supporters of current/former foster youth ages 18-25!

The CA Foster Youth Tax Credit is a new benefit for foster youth ages 18-25. There are many reasons why current and former foster youth should file their taxes (download document):

  • DECREASES POVERTY – Assisting foster youth with completing their taxes provides them much-needed financial support, increasing annual income by 42% for foster youth tax filers with a dependent and 14% for single filers. This income can help youth maintain their housing, school enrollment, food security and more.

  • ENSURES ACCESS TO TAX BENEFIT PROGRAMS – Assisting foster youth with filing their taxes ensures that they receive the full range of ongoing state and federal income support programs as well as one-time benefit programs, such as those provided during the pandemic. A 2021 report found that 60% of foster youth had not received these relief payments because they had not filed their taxes.

  • SUPPORTS PARENTING FOSTER YOUTH AND THEIR CHILDREN – Children of foster youth are at a heightened risk of maltreatment.3 Assisting foster youth with filing their taxes reduces this risk by moving parenting foster youth out of deep poverty and providing critically needed financial support to their children.

  • INCREASES ACCESS TO STUDENT FINANCIAL AID – All recipients of student financial aid must provide their tax return or an IRS Verification of Non-filing Letter. For foster youth who don’t file their taxes, obtaining the required documentation is difficult. Most must complete time-consuming paperwork. Having a completed tax return helps foster youth complete financial aid applications online.

  • MAINTAINS ELIGIBILITY FOR PUBLIC BENEFITS – The income gained from federal and state tax returns does not impact eligibility for other public benefits like CalWORKS and subsidized child care. Public benefit programs have clearly established policies about how to treat income from tax returns and tax credits. Additionally, a completed tax return can make applying for these benefits simpler.

  • ESTABLISHES OFFICIAL INCOME FOR BENEFITS DETERMINATION – Programs such as CalWORKs and CalFresh require an individual to provide annual income, to determine eligibility. This is challenging if they do not have proof of income. Additionally, unemployment requires proof of wages. With documentation of their annual income through tax prep, youth can gain access to critically needed public benefit programs.

  • EDUCATES & HELPS INSTILL A PRACTICE OF TAX FILING – By helping youth correctly file their taxes, they can learn how to file correctly and learn about the benefits of tax filing. For example, youth who are self-employed will be issued a Form 1099. With support, youth can learn how to claim qualifying business expenses and how to make estimated tax payments on untaxed income.

  • UNCOVERS IDENTITY THEFT – Identity theft is common among foster youth.5 A 2021 report found nearly 15% of foster youth discovered someone fraudulently claiming their tax refund. By assisting youth with tax filing while they are still in foster care, fraud can be discovered while youth are connected to supports and services, and fixed.

  • ELIMINATES USE OF HIGH-COST, INACCURATE PAID TAX PREPARERS – In 2016, tax prep services averaged $400.7 These fees can equate to 13% to 20% of a low-income tax filer’s return.8 Additionally, EITC tax filings prepared by paid preparers have a high rate of error. Assisting foster youth with filing their taxes also educates them about free in person and online filing resources and will save them hundreds of dollars each year.

For more information and references, please see How Tax Filing Benefits Foster Youth by John Burton Advocates for Youth.

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