Extending the EITC to Noncustodial Parents: Potential Impacts and Design Considerations. F. Encouraging Participation

05/23/2009

Not all persons eligible for the EITC claim it. The Government Accountability Office (GAO, formerly the General Accounting Office) estimates that 86 percent of those eligible for the child-based EITC claim the credit, compared with 43 percent of those eligible for the childless EITC (GAO 2001). The lower participation rate for the childless EITC is likely attributable to the smaller size of the credit and the fact that a larger percentage of those eligible have incomes below the required filing threshold. NCP EITC participation rates are likely to be highest for policies that offer large benefits, extend furthest up into the income range, and have the simplest application procedures.

Notifying noncustodial parents that they meet child support eligibility requirements and keeping application procedures as simple as possible can help encourage participation in an NCP EITC. While New York does extensive outreach about the NCP EITC, it does not send letters to noncustodial parents informing them that they meet the child support eligibility requirements for the NCP EITC (Sorensen forthcoming). Notifying noncustodial parents that they meet the child support eligibility criteria for the NCP EITC may increase their participation rate. In addition, both New York and Washington, D.C., require that noncustodial parents supply information about their nonresident children’s Social Security numbers on their NCP EITC tax form.[29] This requirement was cited as a significant barrier for claiming the credit in New York since many noncustodial parents do not know the Social Security numbers of their nonresident children (Sorensen forthcoming). Given that child support eligibility is independently verified by the child support agency, such information may be unnecessary, and if so, could be dropped. If sufficient data are available on a standard tax form to determine eligibility, another way to increase participation would be for states or the federal government to automatically assign the NCP EITC to those who are income eligible and have been identified as paying their child support in full.[30]

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