About EITC
What is the Earned Income Tax Credit (EITC)?
The EITC is a special tax benefit for working people who earn low or moderate incomes. It has several important purposes: to reduce the tax burden on these workers, to supplement wages, and to provide a work incentive. Workers who qualify for the EITC and file a federal tax return can get back some or all of the federal income tax that was taken out of their pay during the year. They may also get extra cash back from the IRS. Even workers whose earnings are too small to owe income tax can get the EITC. What’s more, the EITC offsets any additional taxes workers may owe, such as payroll taxes.
Who can get the EITC and how much is it worth?
Single or married people who worked full-time or part-time at some point in 2010 can qualify for the EITC, depending on their income.
• Workers who were raising one child in their home and had family income of less than $35,545 (or $40,545 for married workers) in 2010 can get an EITC of up to $3,050.
• Workers who were raising two children in their home and had family income of less than $40,373 (or $45,373 for married workers) in 2010 can get an EITC of up to $5,368.
• Workers who were raising three or more children in their home and had family income of less than $43,362 (or $48,362 for married workers) in 2010 can get an EITC of up to $5,666.
• Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2010, and had income below $13,470 (or $18,470 for married workers) can get an EITC up to $457.
For previous tax years, consult the IRS website.
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How does the EITC work?
• Eligible workers can pay less in taxes and get a check from
the IRS.
Mr. and Mrs. Johnson have two children, ages 20 and 21, in college. They earned $29,000 and owe the IRS $550 in income tax, none of which was withheld from their pay during the year. Their income makes them eligible for an EITC of $1,936. So, the EITC eliminates their $550 income tax (now they don’t owe IRS anything) and still gives them a refund of $1386.
• Eligible workers can get a check from the IRS.
Marlene Rogers is raising two children and earned $10,000. Her Social Security and Medicare payroll tax was $765. She is eligible for an EITC of $4,000, which pays back her payroll tax and gives her an EITC refund of $3,235.
• Eligible workers who aren’t raising children can get a check.
Joe Smith has no children. He worked part-time and earned $5,300. Because of his low earnings he had no income tax taken out of his paycheck and owes nothing to the IRS. His earnings entitle him to an EITC check for $405, offsetting most of the payroll taxes that were withheld from his pay.
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How do you get the EITC?
• Workers raising a “qualifying child” must file either Form 1040 or 1040A and must fill out and attach Schedule EITC. Workers with children cannot get the EITC if they file Form 1040EZ or do not attach Schedule EITC. Married workers must file a joint return to get the EITC.
• Workers who were not raising a “qualifying child” in their home can file any tax form — including the 1040EZ. These workers write “EITC” (or the dollar amount of their credit) on the Earned Income Credit line on the tax form. They do not file Schedule EITC.
• A correct name and Social Security number must be provided for every person listed on the tax return and Schedule EITC. If this information is incorrect or missing, the IRS will delay the refund.
• Workers don’t have to calculate their own EITC; if they choose, the IRS will do it for them!
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Workers raising children can no longer get the EITC in their paychecks!
Workers who are raising children can no longer get part of their EITC in their paychecks throughout the year and part in a check from the IRS after they file their tax return. This was called the Advance EITC payment option.
Which children qualify for the EITC?
The "qualifying child" must:
- Be younger than the person claiming the child
- Not have filed a joint return other than to claim a refund
The IRS considers a qualifying child:
• any child who lived in your household for more than half of the year,
• is your son, daughter, adopted child, stepchild, grandchild, great-grandchild, or eligible foster child (foster children who are placed with the worker by an authorized government or private placement agency).
• Brothers, sisters, stepbrothers, or stepsisters — as well as descendants of such relatives — if they were cared for as members of the family, and who also
• meets one of the following criteria:
› Was younger than 19 at the end of the tax year, or
› Was a full-time student under age 24, or
› Was permanently and totally disabled at any age
during the year
Valid Social Security numbers are required for qualifying children born before December 31st of the tax year being filed.
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Workers can get FREE help filing their tax forms
Many families that apply for the EITC pay someone to complete their tax forms. This can often cost between $80 and $200, or much more. Getting a “quick tax refund” that comes back in a few days may cost you more than you will get back! Paying for tax preparation takes away from the value of the EITC.
Low-income workers can get free help with tax preparation through local offices throughout New Hampshire by viewing the list of Free Tax Preparation Sites in New Hampshire.
The IRS certifies volunteers to provide free tax help through the Tax-Aide Program of an organization called the AARP.
To find the Tax-Aide program nearest you, go to the Tax-Aide Locator or call 1-888-227-7669.
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Does the EITC affect eligibility for other public benefits?
The EITC does not count as income in determining eligibility for benefits like welfare, Temporary Aid to Needy Families (TANF), Medicaid, food stamps, the Women, Infants and Children (WIC) program, supplemental social security (SSI), or public or subsidized housing. Some benefit programs count the EITC against resource tests in certain circumstances.
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Can immigrant workers get the EITC?
Many legal immigrants can qualify for the EITC, as long as they meet the eligibility requirements. For more information, call the IRS at 1-800-TAX-1040.
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The EITC Can Help Low-Income Workers Not Living With Children
Very low-income workers who are not raising children in their home are eligible for a small Earned Income Credit. In tax year 2003, more than 3.9 million such workers received credits worth over $820 million. The credit is available to people who worked full- or part-time in 2010 and:
• were at least age 25 and under age 65 on December 31, 2010;
• had earnings of less than $13,470 (or $18,470 for married
workers);
• were not raising children in their home who were under age 19
(or under age 24 if the child was a full-time student) for more
than six months during 2010; and
• were not the dependent or qualifying child for the EITC of
another taxpayer in 2010.
The credit for workers not raising children is worth up to $457 for tax year 2010— the average is expected to be about $240.This credit works the same way as the EITC for families: it gives back some or all of the federal income tax taken out of a worker’s pay during the year. The worker may also get additional cash back from the IRS. Even workers whose earnings are too small to have paid federal income tax can get the credit.
How do you get this credit?
Eligible workers not raising children get the EITC by filing a federal income tax return. They can use Form 1040, 1040A, or 1040EZ. On the “Earned Income Credit” line they simply fill in the amount of their credit or write “EITC” and the IRS will calculate the amount of the credit for them. Married workers must file a joint return to claim this credit.
Good News! If a worker doesn’t fill in the credit amount or write “EITC” on the tax form, the IRS will automatically figure out if he or she appears to be eligible for the credit. If so, the IRS will send the worker a notice requesting additional information, such as whether the worker could be claimed as a dependent by another taxpayer. The worker claims the EITC by submitting the additional information requested. Any refund owed to the worker will be received later in the year.
Note: The IRS announced it is no longer offering telefile as of the 2006 filing season. Telefile permitted single and married workers with no dependents to file their tax returns automatically by telephone. Although telephone filng is no longer available, these workers will generally be able to use the "Free File Alliance" at www.irs.gov to file their tax returns electronically at no charge.
Why is the credit for workers not raising children important?
It provides a financial boost to those who work at very low wages or are only able to find part-time work. This includes many day laborers, migrant workers, temporary employees, people who are homeless and general assistance recipients who worked part of the year.
What do we know about the workers eligible for this credit?
In Tax Year 2005, more than 4 million such workers received credits worth over $970 million. Population statistics tell us about workers likely to qualify for this credit.
• The average annual earnings for these workers are about
$6,050. Half (51 percent) of them work in service industries.
About 21 percent work full-time, year round.
• Almost 80 percent of these workers have at least a high school
diploma.
• The majority of these workers — approximately 60 percent —
are non-Hispanic white. About 17 percent are African American
and about 15 percent are Latino.
• Only about 16 percent are married. About 45 percent are single
men and 39 percent are single women.
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Extra Credit for Non-custodial Parents
Lower-income workers whose children do not live with them may also qualify for the Child Tax Credit (CTC). A non-custodial parent who earned more than $11,300 may be eligible for a CTC of up to $1,000 per child under age 17 claimed as a dependent on his or her tax return.
For more information:
IRS Earned Income Tax Credit Questions & Answers
http://www.irs.gov/individuals/article/0,,id=96466,00.html
IRS Tax Topics about Earned Income Tax Credit
http://www.irs.gov/taxtopics/tc601.html
IRS Frequently Asked Questions about "Qualifying Child" rules
http://www.irs.gov/faqs/faq8-1.html
Information en espnol:Crédito por Ingreso del Trabajo(EITC)
http://www.irs.gov/espanol/article/0,,id=119799,00.html
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