Many hard working people may be missing the Earned Income Tax Credit or EITC, that may add an additional $ 5,600 or more to their pocketbooks. This tax credit as the name implies, is for individuals who work for a living, and have a low income. The tax credit was created during 1975 to help reduce Social Security taxes and to provide an incentive for work. It is one of the Federal government’s largest benefit programs for working families. Each dollar saved is a dollar earned, more than ever, in today’s economy, now more than ever, taxpayers should not overlook this credit.
To Qualify for The Earned Income Tax Credit – To qualify for the earned income credit you must meet all of the, age, income, dependency and citizenship requirements. You must file jointly if you are married, because the earned income credit does not apply to persons who are married, but choose file separately. Further, investment income cannot exceed $ 3,100 for 2009.
Many people will qualify for the the Earned Income Tax Credit for the first time this year, because their income declined, which might have resulted from pay cuts or unfortunately, a loss of a job, or reduced employer workload. It may also be applicable to those individuals who changed their marital status or had more children during the year.
If you have a family with three or more children you may be entitled to a larger credit in 2009 as compared to 2009. The reason for the increase is a result of the American Recovery and Reinvestment Act, which temporarily provides an increase in the Earned Income Tax Credit for taxpayers with three or more qualifying children. This new legislation was signed during 2009, and therefore the changes apply to 2009 when you file your income tax return during 2010. The maximum Earned Income Tax Credit for this new category is $ 5,657.
By filing your federal tax returns is the only way that eligible taxpayers can receive the Earned Income Tax Credit . Tax Tip– If you are not required to file an income tax return, because you tax liability is zero, you should consider filing a tax return this year to claim this credit, providing you are eligible for Earned Income Tax Credit.
The Amounts of the Earned Income Tax Credit – The following indicates the levels of tax credit that may be available to you. Providing you are married with 3 children with an income from $ 12,570-$ 21,420 you may be eligible for the maximum credit of $ 5,657. The maximum credit for 2009 is:(i)$ 5,657 with three or more qualifying children (ii)5,028 with two qualifying children (iii)$ 3,043 with one qualifying child and (iv)$ 457 with no qualifying children.
The Internal Revenue Service has estimated that 20% to 25% of additional taxpayers may qualify for EITC but miss out on this credit. Tax Tip– This refundable tax concept is important and is worth repeating, especially if you prepare your own tax return.The EITC is a refundable credit, i.e., therefore, if the amount of the EITC reduces your taxable income below zero you are eligible for a tax refund for that amount.
This article is not intended to provide legal or accounting advice. This information is complex and you can find out more about the EITC directly from the Internal Revenue Service by asking for IRS publication 596. Because the tax laws are complex, change constantly and each situation is unique, the reader is advised to do his or her own due diligence and consult with professionals in these areas.