Don’t Miss Out on an EITC Refund

The Earned Income Tax Credit (EITC) was enacted back in the mid-1970s to assist low- and moderate-income workers. The EITC gives a financial boost to hard working people who can really use it. EITC can lower a working taxpayer’s tax liability, and even result in a refund that is bigger than the amount of federal taxes withheld. 

A tax credit like EITC is even better than a tax deduction. A credit is a dollar-for-dollar tax liability reduction, not a reduction of taxable income. For a worker in the 22% marginal tax bracket, a deduction means 22 cents less in tax where a credit means $1 less in taxes. Even better, the EITC is a refundable credit, meaning that the refund can be even more than the amount of income tax that was withheld or paid for the year.

Despite how large a financial boost it is, the IRS estimates that about 20% of eligible working taxpayers do not claim the EITC. Why? Because they don’t know about it.

Five important for workers to know about EITC:

  • To qualify for the EITC, the worker and everyone reported on her or his income tax return must have a valid Social Security number (SSN).
  • For 2020, workers may choose to use her or his 2019 earned income to figure the 2020 EITC if the 2019 earned income is more than the 2020 earned income. This opportunity to get a higher EITC is part of the Taxpayer Certainty and Disaster Relief Act of 2020. 
  • To qualify for the EITC, a worker must file a federal income tax return using the married filing jointly, head of household, single, or qualifying widow or widower. A worker cannot claim the EITC when using the married filing separately filing status.
  • Workers without a qualifying child are eligible for EITC by meeting the income rules, living in the U.S. for more than one-half of the year, not being claimed as a qualifying child on anyone else’s tax return, and being between the ages of 25 and 65 at the end of the tax year (usually Dec. 31).
  • Claiming the EITC could delay receiving a federal refund because of extra security checks performed by the IRS. 

The IRS wants hard working people who deserve a financial boost to know about EITC. The EITC can lower a working taxpayer’s tax liability to below zero, meaning that she or he could get a refund that is bigger than the amount of federal taxes withheld from her or his paycheck. Knowing about EITC can make a big difference in a person’s life.

Want to know more? Check out the details on the IRS website at https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc.

Are you Eligible for the EITC?

Everything you hear about the new tax law is bad news – state and local taxes capped at $10,000 and miscellaneous deductions eliminated. It seems like a lot of tax benefits are gone or reduced. Isn’t there any good news?

Yes, there is good news about taxes! Some tax benefits have been retained, including one that helps hard-working people who deserve a financial break. It’s called the Earned Income Tax Credit, or EITC, a valuable benefit for working people with low-to-moderate income. Eligibility for the credit and the credit amount depend on your earned income and number of children in your household.

A tax credit is even better than a tax deduction because it’s a dollar-for-dollar reduction of your tax liability, not a reduction of your taxable income. Even better, the EITC is a refundable credit. The EITC could take your tax liability to a “negative” amount, meaning that your refund is even more than just paying back all of your federal taxes due for the year.

To qualify for EITC, you must have earned income (e.g., wages or self-employment income). Your income cannot exceed a specified amount that is adjusted annually by the IRS. To get the credit, you must file an income tax return, even if you do not owe any tax or are not required to file.

Some people don’t know about this credit or do not know that they qualify. Not taking a credit you qualify for? That’s just like giving away money! Who wants to do that?

Don’t miss your EITC refund. Don’t let your friends and family miss their EITC refund. Each year, 30% of the EITC-eligible population is new to this valuable tax credit, many of whom don’t know about it.

Need help? Get details about income limits and credit amounts at www.irs.gov/eitc. Made less than $55K in 2018? Check if you qualify for a larger federal tax refund at www.irs.gov/eitc.

Did you get the hint that you should look into the EITC on the IRS website? Great! Make sure you check it out and keep your friends, family and neighbors from missing a tax credit because they don’t know about EITC. They will thank you.