February 3, 2012 by msquaredlaw
Are you aware of the Earned Income Tax Credit? The Earned Income Tax Credit (“EITC”) is a financial boost for workers earning $49,078 or less in 2011. Four out of five eligible taxpayers filed for and received their EITC last year. Find out if you are eligible! It only takes a few minutes.
Here are ten things the IRS wants you to know about this valuable credit, which has been making the lives of working people a little easier since 1975.
1. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year doesn’t mean you won’t this year.
2. If you qualify, the credit could be worth up to $5,751. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year.
3. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.
4. You do not qualify for EITC if your filing status is Married Filing Separately.
5. You must have a valid Social Security number for yourself (and your spouse if filing a joint return) and any qualifying child listed on Schedule EIC.
6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
7. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.
8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
9. It’s easy to determine whether you qualify. The IRS has developed an interactive tool called the EITC Assistant, which is available on the IRS.gov website. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
10. Free help is available at Volunteer Income Tax Assistance (“VITA”) sites to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA site near you, click here.
For more information about the EITC, see IRS Publication 596, Earned Income Credit.