|
What
is EITC?
The
Earned Income Tax Credit (EITC)
sometimes called the Earned Income Credit (EIC),
is a refundable Federal income tax
credit for low-income working individuals and families.
Congress originally approved the tax credit
legislation in 1975 in part to offset the burden of social
security taxes and to provide an incentive to work.
When
the EITC exceeds the amount of taxes owed, it results in a
tax refund to those who claim and qualify for the credit.
The
EITC is the single biggest anti-poverty
program in existence. It dwarfs programs like welfare and
food stamps. Unfortunately, too few people claim the credit.
How
much money is unclaimed?
West
Central Initiative (WCI), has calculated that roughly $5.5
million per year in EITC dollars is going unclaimed in our
nine county region. 70% of the EITC refunds received by
families are spent locally.
Using conservative economic multipliers, the
region is passing up roughly $25 million in
annual economic activity.
How
far back can I go ?
Families are allowed to go back three years and
file amended returns.
I didn’t earn enough income that
I would have to file, how do I get
the Earned Income Tax Credit?
Many
of the potentially eligible workers don’t know
about the tax credit. Some are not
required to file tax returns, but they can’t take
advantage of the EITC unless they file.
In
addition to the current year, if you were
eligible for the three previous years, you can
submit amended returns for those years.
Why don’t people claim the
Earned Income Tax Credit?
Some
do not know about it. Others who
were
never eligible may now be eligible due to
change in job, unemployment, or family
status. Others think that you have to have
children to receive an EITC credit. In fact,
very-low income individuals without children are
eligible for a refund up to $399.
Often enough, people such as grandparents are
now taking care of their grandchildren in
their home and until now they were never
eligible but just don’t know about it. If all
other eligibility conditions are met, they too can
claim the EITC tax credit.
How much of a refund credit can
be received for the Earned
Income Tax Credit?
A
qualifying, married couple with two or
more
qualifying children can have a credit up to
$4,400, with one child, up to $2,662, and if you have no
children, you could qualify up to $399.
What is a refund anticipation
loan?
It
is a high-cost, high-risk loan. Did you
know
that businesses that prepare taxes
and
offer “quick refunds” are just giving
you
a loan?
If
the IRS should delay your refund, that
loan
can become immediately due. You
may
have already spent the money and
owe
the company who gave you the loan.
Don’t pay to
borrow your own money!
Do You Qualify for EITC?
To qualify, you must meet
certain requirements and file a U.S. Individual Income Tax
Return. As described below, some EITC rules apply to
everyone. There are also special rules for people who have
children and for those who do not.
Individuals and families must
meet certain general requirements:
• You must
have earned income.
• You must have a valid Social
Security number for yourself, your
spouse (if married filing jointly) and
your qualifying child.
• Investment income is limited to
$2,950.
• Your filing status cannot be “married
filing separately.”
• Generally, you must be a U.S. citizen
or resident alien all year.
• You cannot be a qualifying child of
another person.
• You cannot file Form 2555 or Form
2555-EZ (related to foreign
earned
income).
Your income cannot exceed
certain limitations. For Tax Year 2008, you must have
adjusted gross income of less than:
• $38,646
($41,646 if married filing
jointly) with two or more
qualifying
children.
• $33,995 ($36,995 if married filing
jointly) with one qualifying
child.
• $12,880 ($15,880 if married filing
jointly) with no qualifying
children.
If you claim a child, he or
she must meet three eligibility tests:
• Residency Test — The child must
have lived with you in the United
States for more than half of 2008.
• Relationship Test — The child must
be your son, daughter, stepchild,
foster child, brother, sister,
stepbrother, stepsister, or a
descendant of
any of them. Your
child
includes:
▪
A foster child who was placed
with you by an
authorized
placement agency,or by
judgment, decree, or other
order of any court of competent
jurisdiction.
▪ A legally adopted
child or a
child lawfully placed with you
for
legal adoption.
•
Age test — At the end of 2008, the
child must have been under age
19,
a fulltime student under age 24
or
any age if permanently and totally
disabled at anytime during 2008.
Your qualifying child cannot
be used by more than one person to claim EITC. If a child meets the rules to be a
qualifying child of more than one person, only one person
can treat that child as a
qualifying child and claim EITC.
If you don’t have a child, you
must meet three additional tests:
•
At the end of 2008, you must have
been at least age 25, but
under age
65.
•
You cannot qualify as the
dependent
of another person.
•
You must have lived in the
United
States for more than half of
2008.
|
