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As far as percentages go, four out of five, or eighty percent, is not bad. However, when it comes to the Earned Income Tax Credit (EITC), the IRS is asking that we do better.
One out of every five taxpayers leaves money on the table by failing to claim the EITC. This filing season, the financial boost from the EITC is available for individuals whose income is under $49,078, with a maximum credit available of $5,571.
EITC is a refundable credit, meaning that not only can it reduce your tax down to zero, it can also generate a refund made up solely of this government credit.
Because the credit still goes unclaimed by a significant portion of taxpayers, the IRS has tried to identify underlying reasons for the inconsistent eligibility. With that in mind, here is what the IRS found. Ask yourself the following questions:
I wasn't eligible before, but am I eligible now?
The ability to claim the EITC may change from year to year. Factors such as your family size, marital status, type and amount of income all have bearing on the eligibility for the credit. There are two sets of rules for claiming the EITC - There is a standard set that all taxpayers must meet, and then separate rules for those with or without a qualifying child.
Do I have earned income?
The credit it quite literally based on earned income, as defined by the IRS. All wage income and self-employment income qualifies. If your previous income was only unemployment, investment income, interest and dividends, social security or retirement income, you didn't qualify. If you now have earned income however, you may be eligible.
True or False? I'm not required to file a tax return, so I can't claim the EITC.
False. Even if you are not legally required to file, perhaps because your earned income was under the filing threshold (for single taxpayers under 65, filing requirements kick in at $9,500), you may still be eligible for a sizeable refund because of the credit.
I'm thinking of filing married but separate from my spouse. Do I qualify?
No. In order to claim the EITC, your filing status must be something other than Married Filing Separate.
I don't have any children. Can I still claim the credit?
Maybe. You do not need to have a child to qualify for the credit. According to the IRS, individuals without children are the largest group of workers who incorrectly fail to file a return to claim the credit.
The easiest way to find out if you qualify is to use an interactive tool available on the IRS web site. The EITC Assistant will walk you through a set of questions and give you the amount for which you are eligible.
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