Developing outreach strategies for identifying and enrolling residents eligible for tax credits in Colorado
State of Colorado Department of Revenue
November 2024 - March 2025
Why This Matters For Families
Across the country, millions of families are living paycheck to paycheck, struggling to afford their basics on low to moderate incomes. To help these families, over 31 states and the federal government have instituted the Earned Income Tax Credit (EITC), which can provide families with thousands of dollars after filing their federal and state taxes. Tax credits have become a critical anti-poverty program in the United States, providing an essential source of cash for many American workers and families.
The 2021 expansion of the Child Tax Credit (CTC) in the American Rescue Plan reduced child poverty in the United States by 40% that year. However, accessing credits like the CTC is notoriously difficult as they are claimed during annual tax filing. The bipartisan, highly successful EITC reaches only 80% of eligible households nationwide, with lower-income, less-educated households being most likely to leave money on the table compared to other populations. The IRS estimates that roughly 20% of EITC-eligible and CTC-eligible individuals do not receive the credit payments they are owed — the federal EITC alone averaged $2,500 per return in 2022.
Implementation Challenge
In 2024, Colorado passed legislation requiring the state to assist up to 100,000 residents in filing or amending tax returns to receive the EITC and CTC they are owed. This legislation is exciting, and presents a novel opportunity to implement efforts boosting uptake of the EITC and CTC, particularly amongst non-filers. The implementation, however, is a wide-open space to operate in. In partnership with the Colorado Governor’s Office, the Department of Revenue, and Colorado Department of Public Health and Environment, the New Practice Lab is working to determine the specifics within the state law, including answering questions around how the state will identify potential non-filers, and what methods they will use to reach out to them. Furthermore, once these non-filers have been contacted, what can the state do to more easily facilitate tax filing for these Coloradans?
Our Approach
The New Practice Lab and the Colorado State Government worked together from November 2024 - March 2025 to develop an implementation plan for Colorado to help residents claim federal and state tax credits in Summer 2025. Our project has two phases, which will build on the library of knowledge the Lab has established on aiding non-filers:
The first phase of the project was working with the state to craft communications (letter) going out this filing season to non-filers alerting them that they may have tax credits they’re eligible for. Leveraging the Non-filer Landscape Research project, as well as user-research with Colorado residents, our team worked with Colorado to shape this year’s outreach. We are also supporting them in testing the impact of the outreach, measuring how many people filed within a month of receiving a letter, or after three, or six months. What methodologies worked best to get people to file?
In the second phase of the project beginning in May, the Lab will leverage DOR internal data and engage various government agencies within the state to understand what data and processes can be used to identify individuals owed tax credits and potentially pre-populate a tax form, making the process of filing state returns as simple for the end-user as possible.
ORIGINAL OBJECTIVE
Understand best language approaches to take with non-filers to both get them to file and make them aware of tax credit opportunities for which they may be eligible.
WHAT WE’RE PLANNING
Aid Colorado in:
identifying potential populations that would benefit from filing taxes;
and sending out an initial letter to them in March 2025 encouraging them to file taxes.
ORIGINAL OBJECTIVE
Develop strategies to identify residents likely eligible for tax credits who aren’t receiving them.
WHAT WE’RE PLANNING
Analyze data from the Department of Revenue and other agencies that could provide critical information needed to determine tax credit eligibility, including income and household size.
ORIGINAL OBJECTIVE
Improve access to tax credits for non-filers
WHAT WE’RE PLANNING
Explore methods to connect Colorado residents with support to facilitate tax filing and access credits.
What We Learned
Leveraging Department of Revenue (DOR) data to identify families potentially eligible for tax credits but not receiving them is possible, but requires making a number of assumptions that can feel risky/tenuous for DORs.
Even so, outreach is possible and can be valuable. States can determine how their confidence in the identified population informs the outreach tools they use to increase filing, from a generic letter encouraging filing with no personalized information on the one hand, to a fully pre-populated return on the other.
Some of the most impactful early work with state governments involve shifting how Departments of Revenue view tax filing for low income individuals–not as a compliance obligation that brings in revenue (which it often doesn’t), but as one of the most effective tools the government has to deliver benefits to vulnerable families. This shift in mindset opens the door to new strategies for helping families access the funds they are owed.
Next Steps
We are currently determining how our continued support will help Colorado implement their effort to reach 100,000 individuals who have missed out on the EITC or CTC. We expect to provide some support to Colorado through their summer 2025 implementation efforts.
This project has also built on the New Practice Lab’s learnings about how to identify and assist inconsistent filers nationally, informing our future efforts to support families in accessing critical benefits and services they are eligible for.
