The EITC (Earned Income Tax Credit) is simply a financial boost benefiting workers earning $49,078 or less in the year 2011. At least four out of five eligible taxpayers, who filed for their EITC last year, received them. This means anyone can get what they rightfully earned as long as they are eligible.
Here are ten key things you should know about this valuable credit:
- With the annual changes in one’s financial, marital or parental situations, one’s EITC eligibility may change. Review the eligibility rules often; you may have not qualified last year, but this year you may.
- If you are eligible, expect a credit of up to $5,751. This credit not only reduces your tax burden, but may also result in a refund. However, the amount you receive depends on your earned income and whether you have qualifying children.
- In case you qualify, file a tax return and claim the credit specifically. Do not forget to attach Schedule EIC (Earned Income Credit) when filing the Form 1040. In case you file Form 1040A, retain the EIC worksheet after use.
- If your filing status states “Marital Filing Separately”, you are not eligible for EITC.
- A valid Social Security Number is mandatory for yourself, spouse (for joint tax return) and any qualifying child in your household.
- Singles and married couples without children may still qualify. Without qualifying children, there are age and residency requirements to meet as well as dependency rules.
- You will only qualify if you have earned income. Be it from wages or salary, self-employment, and small business or from disability income.
- The IRS has special rules for members of the U.S. Armed Forces in war zones. They can choose to include their non-taxable combat pay as part of earned income for the EITC. In this case, the combat pay still remains non-taxable.
- Using the EITC Assistant, it is easy to determine eligibility. This is an interactive online tool spelling out the eligibility rules. Answer a few questions and find out whether you qualify and get the estimated amount of your EITC.
- You can also get free help when preparing to claim your EITC. At Volunteer Income Tax Assistance, you can get the figure of your credit when doing e-filing. This VITA site can be found on the IRS website and it takes away the hassle of the process of preparing and claiming one’s EITC.