How to Know If You’re Eligible for the Earned Income Tax Credit

by Lynnette Khalfani-Cox, The Money Coach on February 3, 2012

in Taxes


One bright spot of tax season is the possibility of getting back a big income tax refund check from the government.

As an overall financial strategy, I don’t recommend that people rely on income refunds – because if you’re constantly getting one it means you’ve let the government take out too much taxes during the previous year.

But if you can snag a large tax refund check due to you reclaiming a tax credit, well then that’s a smart move.

And one of the biggest tax credits available is the Earned Income Tax Credit, or EITC.  The Earned Income Tax Credit allows you to receive hundreds or even thousands of dollars back from the government provided you meet a set of requirements, including certain income limits and family size criteria.

For instance, here is the maximum Earned Income Tax Credit you can receive based on your 2011 income and family circumstances:

  • $5,751 with three or more qualifying children
  • $5,112 with two qualifying children
  • $3,094 with one qualifying child
  • $464 with no qualifying children

So now that you know the specific dollar amounts you could possibly reap from the EITC, what else should you know? Plenty. Read on for a host of important tips and information concerning your eligibility for the EITC and how you can claim it when you file your income taxes.

10 Things The IRS Wants You to Know About the EITC 

According to the IRS, you are eligible for the Earned Income Tax Credit if you worked during the most recent calendar year and if your income was $49,078 or less in 2011.

Four of five eligible taxpayers filed for and received their EITC last year. And if you want to join their ranks this year, here are 10 things the IRS says you should know.

1. Re-Check Your Eligibility Every Single Year

Just because you didn’t qualify for the Earned Income Tax Credit last year doesn’t mean you won’t this year. So always review EITC rules to see whether or not you are eligible for this credit. It really does vary based on your own personal situation, including your financial, marital and parental circumstances.

2. The EITC Will Reduce Your Taxes and/or Put Cash Back In Your Pocket

As mentioned above, if you qualify for the EITC, the maximum allowable credit could is $5,751. Depending on your overall tax picture, getting the Earned Income Tax Credit could mean the difference between you paying money to Uncle Sam – or getting money back from the government.

If you qualify for the EITC, it not only reduces the federal tax you owe, but it also 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 Earned Income Tax Credit last year was about $2,240, the IRS reports.

3. You’ve Got to Be In It to Win It

If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. 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. You Can’t Be Married But File Separate Returns From Your Spouse

You do not qualify for the Earned Income Tax Credit if your filing status is Married Filing Separately. This may come as a big blow to a lot of people.

Some married taxpayers want to file separately from their spouse for personal or financial reasons. For example, a spouse may owe child support, have delinquent student loans, or be subjected to wage and asset garnishments. In such cases, filing a joint tax return means the entire tax refund check could be snatched away.

Still, if you plan to use the “married filing separately” status on your 1040 income tax return, that tax-filing status automatically disqualifies from receiving the EITC.

5. Social Security Numbers are Mandatory

You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.

6. Some Level of Earned Income is Required

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. You Don’t Always Have to Have Kids

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. Military Members Get Special Treatment

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. Online Help is Available

It’s easy to determine whether you qualify for the Earned Income Tax Credit. The EITC Assistant, an interactive tool available on the IRS website, www.IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

10. Free Tax Preparation Assistance is Nationwide

The IRS also offers free tax help through its Volunteer Income Tax Assistance sites. These are available all throughout the country and are staffed by people trained in taxes, including specialists who can help you 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, read the IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on the IRS website or by calling 800-TAX-FORM (800-829-3676).

 


This Article Answered The Following Money Questions:

  • what disqualifies you for earned income credit
  • how to tell if youre eligible for the earned income credit
  • how to tell if youre eligible for the earned income credit
  • if i do not qualify for earned income tax credit must i still file a form?
  • if you loss money crop farming can you still qualify for earned income credit
  • if youre disabled and earned 5000 will ypu file tax?

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