Sentry Password Protection Member Login

Student Login

Forgot? Show

Stay Logged In

My Profile

Javascript Required

Tax School Homepage

Previous   Next

Earned Income Credit
The Earned Income Tax Credit (EITC) is a financial boost for people working hard to make ends meet. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status. To get the credit taxpayers need to file a return and specifically claim the EITC, even if they aren’t required to file. The EITC is a refundable tax credit. This means taxpayers may get money back, even if they have no tax withheld. Nationwide last year, over 27 million eligible individuals and families received more than $63 billion in EITC. Many special rules apply to the EITC, so taxpayers should review the rules carefully, even when paying someone else to prepare their returns. Generally, the EITC has no effect on welfare benefits. In most cases, EITC payments are not used to determine eligibility for Medicaid, Supplemental Security Income (SSI), supplemental nutrition assistance program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Though unemployment benefits are not earned income, they are taxable income and may affect the amount of EITC.
The EITC varies based on income and family size. The table showing credit amounts can be found in the Instruction booklets for Forms 1040, 1040A and 1040EZ and in Publication 596, Earned Income Credit. This includes the expanded benefit for families with three or more children. Those who qualify for EITC for tax year 2014, can get a credit from:
* $2 to $496 with no qualifyin
g children;
* $9 to $3,305 with one qualifying child;
* $10 to $5,460 with two qualifying children;
* $11 to $6,143 with three or more qualifying children.
As the list shows, not everyone qualifies for the maximum credit. Last year, the average credit was $2,300. The EITC provides a financial boost for millions of hard-working Americans. However, even though most federal tax refunds are issued in less than 21 days, many factors can affect how long it may take for taxpayers to get their refunds. It is also possible that a tax return could require additional review and therefore take longer to process.
Besides filing a tax return, people must meet various requirements. Some of these requirements apply to everyone. Then there are additional requirements that apply to those who have one or more children, and another set of requirements that apply to people who don’t have a qualifying child. Taxpayers must have earned income, such as wages, tips or the income from running a business or farm. Most other types of income, such as retirement pensions, though usually taxable, do not count as earned income; must have a Social Security number that is valid for employment for self, spouse and any qualifying children.
A person can get the credit even with a small amount of investment income, such as interest from a bank account. However, the amount of investment income is limited to $3,300. The filing status used must be single, head of household, married filing jointly or qualifying widow or widower. A taxpayer

Previous   Next

Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved.
Revised: 05/28/15
70