Earned Income Tax Credit can save money for low- income workers
The Earned Income Tax Credit (EITC) can provide a substantial savings for low-income workers.
EITC has made the lives of working people a little easier since 1975, according to the U.S. Internal Revenue Service (IRS).
EITC can be a boost for workers who earned $50,270 or less in 2012, yet the IRS estimates that one out of five eligible taxpayers fails to claim their EITC each year. The IRS wants everyone who is eligible for the credit to get the credit that they’ve earned.
The EITC not only reduces the federal tax you owe, but could result in a refund. You base the amount of EITC on your earned income and the number of qualifying children in your household. The average credit was around $2,200 last year. If you qualify, the credit could be worth up to $5,891.
If your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules. Just because you didn’t qualify last year doesn’t mean you won’t this year.
If you are eligible for the EITC, you must file a federal income tax return to 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. If you file Form 1040A, use the EIC worksheet and keep it for your records. If you use IRS e-file to prepare and file your tax return, the software will guide you and not let you forget this important step. E-file does the work and figures your EITC for you.
You should understand the qualifications for EITC before claiming it. Qualifications include:
· You do not qualify for EITC if your tax filing status is Married Filing Separately.
· You must have a valid Social Security number for yourself, your spouse – if filing a joint tax return – and any qualifying child listed on Schedule EITC.
· You must have earned income. You have earned income if you are paid wages, you are self-employed, you have income from farming or you receive disability income.
· Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet age and residency requirements as well as dependency rules.
· 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 as earned income for the purpose of computing the EITC. Even if you make this choice, your combat pay will remain nontaxable.
Using the EITC Assistant, it is easy to determine if you qualify. The EITC Assistant, a helpful tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and to estimate the amount of your EITC.
With IRS Free File, you can claim EITC by using brand name tax preparation software to prepare and e-file your tax return for free. It’s available exclusively at http://www.IRS.gov/freefile. Free help preparing your return to claim your EITC is also available at one of thousands of Volunteer Income Tax Assistance (VITA) sites around the country. To find the volunteer site nearest to you, use the VITA locator tool on IRS.gov.
For more information about the EITC, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or by calling 800-TAX-FORM or (800) 829-3676.
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