The Earned Income Tax Credit, or EITC, is one of the filing claims that is delaying federal (and in some cases, state) tax refunds this year.
But even if you have to wait a few extra weeks to get your refund from Uncle Sam (or your state tax office), filing for the EITC is usually worth it.
It's worth more than $6,000 for some filers. And all or some of that money could be as a tax refund.
Why credits rule: Like all tax credits, the EITC is a dollar-for-dollar offset of any tax you owe. Let's say your tax bill is $1,000 and you have a tax credit of $1,000. That credit means you don't owe the U.S. Treasury anything.
But the EITC also is a refundable credit, and this is even better. With a refundable tax credit, you could get tax cash back even if you don't owe any taxes.
Let's go back to that $1,000 tax bill mentioned a few sentences earlier, but this time you have a refundable credit of $1,200. In this case, you use the credit to erase your $1,000 tax liability and then get the $200 extra as a refund.
For the 2017 filing season that's now underway, the EITC is worth up to $6,269 for some eligible families.
Many overlook the money: You'd think that kind of money would have people clambering (usually figuratively, but sometimes claiming the EITC is rather difficult, so ...) to get those tax dollars. It does. To a degree.
Last year, according to Internal Revenue Service data, more than 27 million eligible workers and families received more than $67 billion in EITC refunds. The average EITC amount in 2016 was about $2,455.
But a whole lot leave their possible tax credit cash on the table.
The IRS says millions of workers who could claim the EITC every year don't. In fact, around 20 percent of potential EITC recipients every year never apply for the credit.
To change that, the IRS holds an annual EITC Awareness Day to get the word out to eligible filers. You guessed it. That EITC day is today!
Here's what you need to know and/or do to get your EITC refund.
Workers only, please: The name of the credit is key. It is available only to folks who get earned income, or what non-tax geeks know as wages or salaries.
Self-employment earnings count, too.
But not any money you made while incarcerated, as part of a work release program or while in a halfway house.
Service personnel issues: Members of the military get some special EITC consideration. (Yes, some of our armed services personnel are paid so little that they are eligible for this tax credit.)
When a service member gets combat pay for serving in a dangerous situation, that money generally is tax free. And that's generally a good thing when it comes to taxes.
But with the EITC, you need to make a certain amount of money (but not too much) to get the credit's maximum benefit. So for EITC calculation purposes, service members can choose to include all or none (it's either or; you can't use just a part of it) of their combat pay.
Kids not required: The EITC often is touted as tax help for lower-income working families. It is.
But some single taxpayers who don't have any dependent children also can claim the EITC.
In these cases, you must be at least 25 years old, but younger than 65 at the end of the tax year. You also must live in the United States for more than half the year and you can't qualify as another person's dependent.
So if you're a person without any dependent kids, but not a very high-paying job and meet the other requirements, don't ignore the EITC. It could get you some welcome tax cash.
Earning triggers, limits: Now about the earned income requirement. Since this tax break was designed for folks who don't make that much, just what does the IRS consider too much?
Like most other tax situations, it depends on your filing status. And for EITC purposes, the number of kid you have also matters.
For 2016 taxes, you can claim the EITC if your income is less than:
|
If filing as |
Number of Qualifying Children Claimed |
|||
|
None |
1 |
2 |
3 or more |
|
|
Single, |
$14,880 |
$39,296 |
$44,648 |
$47,955 |
|
|
$20,430 |
$44,846 |
$50,198 |
$53,505 |
While having only investment income will disqualify you from claiming the EITC, you can have some. But not too much. If you have more than $3,400 in unearned income, you can't apply for the EITC.
And if you're wondering where the married filing separately status info is, there isn't any. If that's how you're submitting your taxes, you can't file for the EITC.
Maximum EITC amounts: Finally, the big question. Just how much money can you get from the EITC?
The maximum EITC amounts for eligible 2016 tax return filers are:
- $6,269 with three or more qualifying children,
- $5,572 with two qualifying children,
- $3,373 with one qualifying child and
- $506 if you don't have any qualifying children.
That money could do a lot of taxpayers a lot of good. So if you or someone you know might be eligible for this tax break, please look into claiming the EITC.
You can use the IRS' online EITC Assistant to see if you qualify.
If you do, your tax preparer or tax software can help you determine just how much the EITC might be worth on your 2016 taxes.
You also might find these items of interest:
source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/40lGWqPhwwA/millions-of-taxpayers-are-missing-out-on-eitc-tax-refunds.html
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