It is not that easy to apply, but it is worth the effort.
The Earned Income Tax Credit (EITC) provides a large refund to families with low- or moderate-income children who claim it on their tax returns this year with the Internal Revenue Service (IRS).
According to a statement on the IRS website, last year, more than 25 million taxpayers received more than $62 billion in EITC; while the average amount for the credit was $2,461. A family with three or more children could receive up to $6,660 this year, and up to $538 for taxpayers without a qualifying child.
Here are some key points about the credit and how to claim it
EITC Eligibility
To qualify, workers must have income and adjusted gross income within certain limits, and meet certain basic rules. A worker who does not have children must meet additional rules. In the case of having dependents, the individual must meet all of the qualifying child rules for the worker or the worker’s spouse, if filing a joint return. Taxpayers earning $56,844 or less would be eligible to receive the EITC.
Only one person can claim the same qualifying child.
In the case of a qualifying child for both parents and another person, the other person can only get the credit if he or she has a higher adjusted gross income (AGI) than either parent. The person who does not claim the qualifying child after applying the tie-breaker rules can then claim the EITC without a qualifying child, if he or she meets the other requirements, the IRS.gov website states.
Social Security numbers required for all
In order to claim the credit, taxpayers must have a valid Social Security number as well as their spouse if filing jointly, and for each qualifying child, before filing their return. Applicants must obtain SS numbers by the tax filing deadline, including qualified extensions. Other than this requirement, the individual must have the following:
- Proof of earned income.
- Investment income less than $3,650 in the tax year in which you claim the credit.
- Claim a certain filing status.
- Be a U.S. citizen or resident alien for the entire year.
Refund Delays
The law stipulates that the IRS withhold refunds claiming the EITC and the Additional Child Tax Credit (ACTC) until mid-February. “The IRS must withhold the full refund, including the portion not associated with the EITC or ACTC. This helps ensure that taxpayers receive the correct refund and allows the agency more time to help detect and prevent fraud,” the agency states on its website.
It is unclear when direct deposit refunds will begin arriving this year, although the tax season begins on February 12.
Avoid Mistakes
Due to the complexity of the EITC claiming process, many claimants make mistakes when filling out and submitting the documents. This is why workers should be guided by experts in case they have doubts as to whether or not they qualify for the credit. Common mistakes listed by the IRS include:
- Claim a child who does not meet the four tests for a qualifying child of age, residence, relationship, and joint filing.
- Filing as single or head of household, if married.
- Reporting incorrect income or expense amounts.
- Missing or incorrect social security numbers for self, spouse or qualifying children.
How to Claim the EITC
To claim the EITC, taxpayers must file a Form 1040, 1040A or 1040EZ. If a taxpayer claims the EITC with a qualifying child, Schedule EIC must be completed and attached to the tax return. The Schedule EIC provides the IRS with information about the qualifying child or children, including their names, ages, SSNs, relationship to the taxpayer, and the amount of time they lived with the taxpayer during the year.
The EITC Wizard to determine eligibility
The initial way to verify whether you are eligible to claim the credit is through the EITC Wizard, which is available in both English and Spanish from the IRS website.
To access the service, you must visit the IRS website (IRS.gov) and look for the “Use the EITC Assistant” option. You can also access the tool in the “Credits and Deductions” section under “Earned Income Tax Credit” (EITC).