EARNED-INCOME TAX CREDIT: A BENEFIT FOR LOW-TO-MODERATE TAXPAYERS
Disclaimer: I am not a certified public accountant, nor am I affiliated with the Internal Revenue Service (IRS) in any way. My reason for writing this article is to provide low-income taxpayers with hope of navigating a tax burden.
The Earned-Income Tax Credit (EITC) is a federal income tax credit program, viewed as an anti-poverty tax benefit, that reduces the amount of taxes owed and provides a refund for working individuals or families with low to moderate income, even if no income tax is due. This benefit is available to both taxpayers with a Qualifying Child and those who qualify as Childless Workers.
You may be eligible for a tax refund already paid by a payroll deduction during the year if your owed amount is less than the EITC amount. The credit amount you can claim depends on your earned income, filing status, and the number of qualifying children.
What is the Eligibility for EITC?
To claim the EITC, you must meet all the following general requirements:
- You must have earned income (from wages, salary, tips, or self-employment).
- Your earned income and Adjusted Gross Income (AGI) must be below specific limits the IRS sets for the tax year.
- Your total investment income (interest, dividends, etc.) must be $11,000 or less (Note: This is subject to change each year).
- U.S. citizen or a resident alien for the entire year.
- A valid Social Security number by the tax return’s due date.
- Your filing status must be not married, filing separately.
Additional Rules for Childless Workers
If you do not have a Qualifying Child, you must also meet these rules:
- You must have lived in the United States for more than half the tax year.
- You must be at least 25 years old but under 65 at the end of the tax year.
Rules for a Qualifying Child
If you have a Qualifying Child, you must meet the age, relationship, residency, and joint return tests. The child must generally be under age 19 (or under 24 if a full-time student), or any age if permanently or totally disabled.
How to Claim the EITC (Including Prior Years)
To claim the EITC for the current tax year, you must file Form 1040 or Form 1040-SR. If you are claiming the credit with a Qualifying Child, you must also attach Schedule EIC. You can also claim the EITC for previous years. You have up to three years from the tax return’s due date to claim a refund. To file for prior years:
- If you have not filed a return for that year, you must file the correct year’s Form 1040 and attach Schedule EIC (if claiming based on a qualifying child).
- If you filed a return but did not claim the EITC, you must file an amended tax return using Form 1040-X. You will need to attach the corrected version of the original tax form (Form 1040 or Form 1040-SR) and the Scheduled EIC (if applicable) for that prior year to your Form 1040-X.
—Kenneth Sullivan
Source: