Are you one of the individuals who is eligible for the Earned Income Tax Credit? This credit can be a financial help for people who earn $49,078 or less in 2011. Four of five eligible taxpayers filed for and received their Earned Income Tax Credit (EITC) last year.
Here are some facts and tips about the EITC.
1. Each year of your life can bring big changes. Just because you didn’t qualify for the EITC last year doesn’t mean you won’t this year, because as your financial, marital or parental situations change, your ability to qualify may change, too.
2. If you qualify for the EITC, your 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. You must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file- if you are eligible to claim the credit. 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. If your filing status is Married Filing Separately, you do not qualify for EITC .
5. You must have valid Social Security numbers for yourself, your spouse (if you are 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 by using the EITC Assistant, which is an interactive tool available on the IRS website.
10. Free help is available at Volunteer Income Tax Assistance 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, visit the IRS.gov website.
For more information about the EITC, see IRS Publication 596, Earned Income Credit. You can download this publication – available in English and Spanish – from this website or order it by calling 800-TAX-FORM (800-829-3676).
Here are some helpful links: