Paycheck Plus Program

Program overview

  • Expanding EITC eligibility to reduce poverty: The Paycheck Plus Program (PPP) was a refundable tax credit program for low-income adults without dependent children that offered more expansive eligibility criteria and larger benefits than the federal Earned Income Tax Credit (EITC) program. Participants in the Paycheck Plus Program saw increased incomes, small increases in employment rates, increased receipt of tax credits, and increased payment of child support.

  • Including adults without dependent children: While the federal EITC primarily serves parents of dependent children, the Paycheck Plus Program expanded eligibility for low-income single adults without dependent children. PPP was operated by a city or county social services agency. The agency recruited individuals who were receiving social services or had low earnings, and also partnered with tax preparation programs that assist low income households to identify potential beneficiaries.

  • Mimicking the EITC program: The Paycheck Plus Program mimicked the federal EITC program, requiring that an individual file federal income taxes and have earned income within a set range. However, it did involve additional steps - namely, participants accessed the benefit by submitting their annual tax forms to PPP.

  • Reducing severe poverty: Findings from the New York site indicated that PPP reduced the incidence of severe poverty among study participants, or those with income less than 50 percent of the poverty line.

Two studies with rigorous designs provide some evidence for the Paycheck Plus Program as a strategy for increasing income, employment, and tax credit receipt among adults without dependent children.

  • A 2018 randomized controlled trial in New York found that enrollment in Paycheck Plus increased annual after-bonus earnings by an average of $635 and annual employment rates by 2.5 percent, while reducing the incidence of severe poverty by 10 percent. Program enrollment also increased the payment of child support in two out of three years studied.

  • A 2022 randomized controlled trial in Atlanta found that Paycheck Plus increased annual after-bonus earnings by an average of $775 in year one but had no discernible effect in subsequent years. The program did not significantly impact employment rates or the payment of child support.

  • Learn from the EITC outreach model: The IRS highlights a series of best practices for improving federal EITC outreach. Were EITC benefits expanded for low-income adults without dependent children, local tax preparation agencies should consider these best practices when conducting outreach to this group. These best practices include: sharing anonymous stories of previous recipients, promoting PPP alongside similar initiatives, featuring PPP information on financial aid websites, and hosting educational events for human resources personnel.

  • Integrate PPP with tax preparation assistance: Were the EITC credit expanded, local stakeholders should identify and support partner organizations that offer tax preparation assistance. As tax preparation programs like VITA typically serve primarily low-income clients, they are in a strong position to identify eligible recipients. Additionally, as individuals must file their taxes in order to receive an EITC benefit, providing tax preparation services can increase receipt of benefits.

  • Provide employment information in tandem with application: An evaluation of the Paycheck Plus Program found that individuals who received information about employment services when applying to PPP were more likely to be employed by the time they received their benefit. As such, were EITC benefits expanded, tax preparation providers may consider including employment services as part of their program design.