The EITC (Earned Income Tax Credit) was signed into law in 1975, by Congress, as a way to relieve taxes and to supplement the wages for low income workers. There are numerous credits available among the tax laws, but what sets the EITC apartment from most of the other credits, is that it is a refundable credit. The majority of other credits will only reduce your tax liability, but the EITC serves double purpose. It reduces the tax liability and can give you a refund when there would ordinarily not be one.
Government figures indicate that in any given tax season, millions of dollar are unclaimed by families who are eligible for the EITC. The majority of citizens do not know they are eligible because their income falls below the level of requirement that makes it mandatory to file a tax return and they are under the impression that since they are not required to file a return, then they are not eligible for the EITC. The EITC is available to those who have an AGI of $45,060 or $50,270 if you are married and filing a joint return. Although you may not have any tax liability, you must file a return to receive the EITC.
Another requirement for receiving the EITC is that you must be at least age 25 years or older, but not over the age of 65 years and your earned income fall within the range as mentioned above. Regardless of the age, a person cannot be claimed as a dependent of another tax return and receive the EITC. All dependents listed on the tax return must pass a relationship test that has been developed by the IRS before the credit can be received on a tax return. It is not necessary to have a dependent before receiving the credit, but if there is a dependent involved, you must be in a position to prove that the dependent has been taken care of by you during the tax year in which you are reporting.
The one major thing that is vital to receiving the EITC is that you must have earned income. Meaning your income must be reported on a W2, a 1099 or 1099R or you have income in which you actually worked for. Certain investment income, not to exceed $3200, is permissible. Income from unemployment compensation is not allowable because it is not earned income.
You must be a U.S. citizen or Resident alien with a valid Social Security card before you can receive the EITC. If the Social Security card reads “Not Valid for Employment”, you cannot take the EITC. You can take the EITC if your Social Security card reads, “Valid for work only with INS or DHS authorization” and meet all the other requirements for the credit, this particular Social Security card is a valid one for the EITC.
If you are married and use the filing status “Married Filing Separate”, as a general rule, you are not eligible for the EITC. However, if you and your spouse have not share the same residence for six months during the year for which you are filing, you may be eligible for the credit.
Please note that all rules apply to everyone, but all circumstances are different, which means the amount of credit received will vary. So, go out and get some tax relief today.