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:

• EITC Assistant
• Earned Income Tax Credit

Daniel Stoica Accounting Professional

The Earned Income Tax Credit (EITC) is a popular tax credit for low-and moderate-income workers and working families. Approximately one in five eligible taxpayers do not claim the EITC, but many who do claim the credit do so incorrectly or are even ineligible. In order to ensure that the credit is taken by those taxpayers who do qualify, the IRS is now requiring all paid tax return preparers to file a due diligence checklist, or Form 8867, with any federal tax return that is claiming the EITC. This form is normally required to be completed and filed in a preparer’s records, but now the form must also be included with the returns.

Unlike most deductions and credits, the EITC is refundable, meaning that taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit is $5,751.

To make sure that eligible taxpayers receive the correct credit amount, this new reporting regulation requires preparers to file the Form 8867 with each return that claims the EITC, effective January 1, 2012. In addition, the penalty for noncompliance with the due diligence requirement has increased from $100 to $500.

More information about EITC and the due diligence requirement for tax return preparers is available on IRS.gov.

Daniel Stoica Accounting Professional

The IRS has introduced regulations for 2010 that will require tax preparers to file a “due diligence check-list”, the 8867 Form, with tax returns that claim the Earned Income Tax Credit (EITC).

The due diligence stipulation was passed in Congress more than ten  years ago. It was put in place to lessen error on tax returns that claim the EITC. These are generally prepared by tax professionals.

The 8867 Form, or Paid Preparer’s Earned Income Credit Check-list, was developed by the IRS in order to assist preparers in verifying eligibility information from taxpayers. Preparers must keep copies of these forms or other documents in case the IRS needs to review them. Beginning January 1^st, 2012, the 8867 Form will need to be filed with every tax return claiming the EITC.

REG-140280-09 will provide more information on this requirement. Taxpayers who wish to comment on this regulation must do so no later than November 10^th, 2011. A public hearing on the matter will be held on November 7^th, 2011.

The Earned Income Tax Credit is available to low and moderate income taxpayers and their families. The benefits are based on income, family size and filing status. The EITC is refundable and taxpayers can receive the credit even if they don’t owe taxes. The maximum credit is $5,751 for the 2011 tax year.

One in five taxpayers will be able to claim the EITC, but many of them incorrectly figure the amounts or find out they don’t qualify. The IRS is taking this new step to make sure the credit is offered to taxpayers who are eligible. More than 26 million taxpayers got $59 billion in EITC in 2009 alone, and nearly 66% of those returns were prepared by professional tax preparers.

Daniel Stoica Accounting Professional

Many taxpayers who have disabilities can qualify for tax credits, benefits and deductions. Even the parents of children with disabilities can qualify for some tax breaks.

• If you are considered legally blind and file with Standard Deductions, you may be eligible to take larger deductions.
• If you have a disability, are employed and have Related Work Expenses, you may qualify to claim any business expenses related to your workplace. These expenses must be proven to be necessary in order for you to perform your job effectively.
• A credit for the elderly and disabled can be claimed for taxpayers 65 years of age or younger; however, they must be retired and on permanent and total disability.
• You can deduct medical expenses if you itemize your deductions by using the IRS 1040 Form, Schedule A.
• You may be able to claim the Earned Income Tax Credit if you have disabilities or are the parent of a disabled child. If you retired while you were on disability, your disability payments are considered earned income and are taxable until you are 65  years old. The EITC is a credit, so it will reduce your liability and potentially give you a refund. If you are between the ages of 25 and 65 and are disabled with no children, you may still be eligible for the EITC. Age restrictions are waived if you have a disabled child and claim the EITC. If you are eligible for Supplemental Social Security Income or Medicare, you will not be considered as having income if you choose to take the EITC.
• You can claim the Child or Dependent Care Tax Credit if you pay someone to come to your home to care for your disabled child or spouse.

If you think you or someone in your household may qualify for these credits, speak to a tax professional about all of your options for getting your maximum amount of deductions and credits.

Daniel Stoica Accounting Professional

Tax Credits and Benefits for Disabled Taxpayers

These tax tips are of particular interest to people with disabilities and those who care for people with disabilities.

IRS Tax Tip 2011-24, February 03, 2011
Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.

Here are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.
6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do — in fact — qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.