8 Things You May Not Know About the Earned Income Credit

The Earned Income Tax Credit is for people who work but have lower incomes. Here are some interesting facts about the EITC.

1. A quarter of all taxpayers that qualify don’t claim the credit. The Earned Income Tax Credit is money that can be used to make a difference in your life. Just because you didn’t qualify last year doesn’t necessarily mean that you won’t this year.  As your financial situation changes from year to year, you should review the EITC eligibility rules to determine if you qualify.

2. If you qualify, it could be worth up to $4,800 this year. If you qualify, you could pay less federal tax or even get a refund. The EITC is based on the amount of your earned income and whether or not there are qualifying children in your household.

3. Your filing status cannot be Married Filing Separately. Your filing status must be married filing jointly, head of household, qualifying widow or single.

4. You must have a valid Social Security Number. You, your spouse (if filing a joint return) and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.

5. You must have earned income. This credit is called the “earned income” tax credit because you must work and have earned income to qualify.  You have earned income if you work for someone who pays you wages or you are self-employed.

6. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.

7. Special rules apply to members of the U.S. Armed Forces in combat zones.  Members of the military can elect to include their nontaxable combat pay in earned income for the EITC.  If the election is made, the combat pay remains nontaxable, but all nontaxable combat pay that is received must be included in earned income.

8. Advance Earned Income Tax Credit. You don’t have to wait until you file your tax return to receive your EITC.  Advance EITC is a portion of the EITC that qualified workers may be able to receive in advance payments, added to their wages throughout the year.  For more information, see Form W-5, Earned Income Credit Advance Payment Certificate.

For more information about how the EITC and Advance EITC may affect you or a member of your family, please call this office.

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