Earned Income Credit (EIC or EITC)

You could be one of the thousands of Americans missing out on federal tax cuts.

The federal government says some millions of American taxpayers fail to apply for the Earned Income Tax Credit.

EITC provides low income workers with a tax rebate of up to $4824 for families with two or more children.

 

Don't pass by Earned Income Tax Credit

Riddle me this: Why are some consumers so eager to respond to dubious unsolicited offers - but unwilling to take legitimate offers of free money?

Perhaps it's because the agency offering the cash is the IRS, an organization not generally associated with generosity.

But if you're a low-wage worker, the Earned Income Tax Credit just might change your mind.

The IRS distributed $43billion among 22million taxpayers nationwide last year, including $2.8billion to 1.45 million in New York State.

It would have given away even more money, but an estimated one in four eligible taxpayers failed to claim the tax credit.

Blame it on the complexity of the eligibility requirements, along with the fact that some of the very low wage earners who qualify for the credit aren't even required to file income tax returns.

So whether you typically file a tax return or not, take the advice of Treasury Secretary Henry Paulson: "Check to see if you are eligible" for the credit.

For the 2008 tax year, the maximum credit is $4,824 for a family with two or more children; $2,917 for a family with one child and $438 if the taxpayer does not reside with children. Generally, a taxpayer can qualify if he:

  • has more than one qualifying child and earns less than $37,783 ($39,783 if married filing jointly),
  • has one qualifying child and earns less than $33,241 ($35,241 if married filing jointly), or
  • Does not have a qualifying child and earns less than $12,590 ($14,590 if married filing jointly).  

1) What is the Earned Income Tax Credit (EITC)?

2) Is the Earned Income Tax Credit (EITC) known by any other name?

3) How often can I claim an EITC?

4) What are the eligibility requirements for an Earned Income Tax Credit (EITC)?

5) Can I use my EITC in an Individual Development Account (IDA) or a Plan for Achieving Self Support (PASS)?

6) How do I claim an EITC?

7) Does what I have in the bank and or what I own affect my eligibility for an Earned Income Tax Credit (EITC)?

8) How do I know how much my EITC is worth?

9) When can I receive benefits from the Earned Income Tax Credit (EITC)?

10) Do I have to meet any residency or citizenship requirements to qualify for an Earned Income Tax Credit (EITC)?


1) What is the Earned Income Tax Credit (EITC)?

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The Earned Income Tax Credit is a federal tax program that reduces the amount of income tax owed by low to moderate income workers. The credit ranges from $438 to $4,824 depending on your income and the number of qualifying children in your family.

2) Is the Earned Income Tax Credit (EITC) known by any other name?

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The program is often referred to simply as the Earned Income Credit (EIC).

3) How often can I claim an EITC?

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You can claim an EITC every year that you qualify.

4) What are the eligibility requirements for an Earned Income Tax Credit (EITC)?

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To be eligible for the Earned Income Tax Credit (EITC) you must:
  • Have earned income from employment, self-employment or employer-paid disability benefits received prior to retirement.
  • Meet adjusted gross income requirements.
  • Have a Social Security Number valid for employment.
  • File a joint tax return if married
  • Be a U.S. citizen or legal resident. If you’re a nonresident alien, you must be married to a U.S. citizen or legal resident and filing a joint tax return.
  • Live in the U.S. for more than half of the year.
  • Be 25-64 years of age, if you aren’t claiming any qualifying children (if you are claiming qualifying children, you can be any age).
EITC Calculator 2009
 
EITC Benefit for Tax Year 2008
No Children
One Qualifying Child
Two or More Qualifying Children
Single
Adjusted gross income of less than $12,880

Maximum Tax Credit $438

Adjusted gross income of less than $33,995

Maximum Tax Credit $2,917

Adjusted gross income of less than $38,646

Maximum Tax Credit $4,824

Married (filing jointly)
Adjusted gross income of less than $15,880

Maximum Tax Credit $438

Adjusted gross income of less than $36,995

Maximum Tax Credit $2,917

Adjusted gross income of less than $41,646

Maximum Tax Credit $4,824

In addition, you cannot:

  • Claim foreign income using Form 2555Offsite Link or 2555EZOffsite Link.
  • Have investment income that exceeds $2,900 for Tax Year 2007.
  • Be the dependent of another person.
  • Be the qualifying child of another person.

5) Can I use my EITC in an Individual Development Account (IDA) or a Plan for Achieving Self Support (PASS)?

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Yes. Money received from an EITC can be deposited into an IDA and matched, or set aside in a PASS. These are two ways to achieve work or savings goals more quickly.

6) How do I claim an EITC?

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If you are eligible, you can claim an EITC while filing your annual federal tax return. If you don’t have any qualifying children, use IRS Form 1040Offsite Link, 1040AOffsite Link, or 1040EZOffsite Link. If you have a qualifying child, you will need to use Form 1040 or 1040A and attach a Schedule EICOffsite Link.

7) Does what I have in the bank and or what I own affect my eligibility for an Earned Income Tax Credit (EITC)?

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While there are no asset requirements to claim the EITC, you cannot have investment income that exceeds $2,900 in tax year 2008 (filing by April 2009).

8) How do I know how much my EITC is worth?

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The value of your EITC is based on your adjusted gross income and the number of qualifying children in your family. You can calculate your EITC yourself by using the Earned Income Credit Worksheet in Form 1040Offsite Link, Form 1040AOffsite Link, or Form 1040EZOffsite Link. Or you can ask the IRS to calculate it for you by noting an “EIC” in the Earned Income Credit line on your tax return.

For an estimate on the value of your EITC, use the Center on Budget and Policy Priorities Tax Credit EstimatorOffsite Link.

9) When can I receive benefits from the Earned Income Tax Credit (EITC)?

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You can claim your Earned Income Tax Credit while filing your annual federal tax return.

Or, if you are eligible for an Advance Earned Income Tax Credit (AEITC), you can have monthly payments deposited into your paycheck throughout the year. The remainder of your AEITC will be disbursed when you file your annual tax return.

10) Do I have to meet any residency or citizenship requirements to qualify for an Earned Income Tax Credit (EITC)?

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Yes. To qualify for the Earned Income Tax Credit, you must live in the U.S. for more than half the year. You must also be a U.S. citizen or legal resident. Or if you’re a nonresident alien, you must be married to a U.S. citizen or legal resident and filing a joint tax return.
 
This page courtesy  of www.disabilitybenefits101.org
 
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