Ask The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

Would you like to receive a no-strings-attached check for hundreds or even thousands of dollars from the federal government this tax season? If you can answer “Yes” to 10 short questions, you may qualify for a huge financial windfall, compliments of Uncle Sam.

The free money in question is the Earned Income Tax Credit, also known as the EITC. The EITC is a refundable tax credit ranging from $438 to $4,824 and designed to supplement wages for low-to-moderate income workers. But don’t be fooled by the term “low-income,” because it doesn’t just apply to blue-collar employees or those earning small salaries. Tens of millions of individuals and families previously classified as “middle class” – including many white-collar workers – are now considered “low income” because they lost a job, took a pay cut, or worked fewer hours last year.

Since the EITC is a tax credit, not a deduction, if you claim the EITC you can slash the taxes you owe to zero, and even get lots of money back from the government.

The IRS reports that the average EITC refund is about $2,000. The exact refund you receive depends on your income, marital status and family size. To get a refund from the EITC you must file a tax refund, even if you don’t owe any taxes.

In 2008, 24 million taxpayers used the EITC program to claim more than $48 billion. Unfortunately, 25% of taxpayers who are eligible for the earned income credit fail to claim it, according to the IRS. Some people miss out on the EITC because the rules can be complicated. Others simply aren’t aware that they qualify for this hefty benefit.

You don’t have to remain in the dark, however, about the earned income credit. Check back tomorrow, I’ll post a 10-question quiz that let’s you see if you qualify. You can also get help with the EITC by using the new EITC Assistant, available in English and Spanish on the IRS website:

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 Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.