Putting Advance EITC Payments to the Test

By Kate Skochdopole

Administering the EITC in quarterly payments throughout the year – rather than as a lump sum at tax time – significantly reduces financial stress among recipients, according to preliminary findings from a new pilot program.

Chicago’s EITC Periodic Payment Pilot Project is now midway through an evaluation of how advance EITC payments may help workers make ends meet throughout the year. The project is a collaborative effort between the Center for Economic Progress (CEP), the Chicago Department of Family and Support Services, the Office of Chicago Mayor Rahm Emanuel, the Chicago Housing Authority and the University of Illinois at Urbana-Champaign.

The 18-month pilot program administers quarterly EITC payments to 343 families and compares their experience to those of 164 families receiving a standard EITC payment at tax time. The study analyzes both the administrative feasibility and the impact of the two options and can help guide policy decisions around advance EITC payments.

U.S. Senator Sherrod Brown (D-OH) recently unveiled a plan to allow eligible lower-income workers to access a portion of their EITC in advance, as an alternative to more costly lending options. The Chicago pilot’s interim report indicates that such a plan could not only benefit workers and their families but is also easy to implement:

  • Because quarterly payments must be calculated in advance, concerns have centered on the difficulty of predicting the amount of an individual’s EITC using their previous year’s tax return. But the study shows the vast majority of EITC recipients receive comparable payments each year, making it feasible to accurately predict who should receive the credit and for how much.
  • Another concern was that sending EITC payments four times per year might require more work and expense for administrators. But because all participants provided bank account information, dispersal of the quarterly payments was uncomplicated and inexpensive.
  • Participants reported feeling less stressed about their financial situation when receiving quarterly payments. When asked to evaluate their stress level around feeding their family, 72 percent of participants receiving quarterly payments reported feeling less stressed versus 33 percent of the control group. Additionally, 39 percent of the quarterly participants reported increased savings versus only 22 percent of those who received lump-sum payments.
  • The results also indicate that the participants themselves prefer the quarterly payments method.   Fully 86 percent of participants said they would take part in the program if it was offered again and only three of 343 participants opted out of the program during the year.

The full report is expected this June. For more information on the Periodic EITC Payment Pilot Project, contact Dylan Bellisle, EITC Pilot Program Manager at CEP, at dbellisle@economicprogress.org.