On January 26, 2024, the Internal Revenue Service, along with its partners across the nation, highlights the Earned Income Tax Credit during “EITC Awareness Day.” Celebrating its 18th year, this campaign serves as a crucial reminder to millions of workers about the importance of this significant tax credit.
The Earned Income Tax Credit (EITC) is a federal tax credit designed to provide financial assistance to low- to moderate-income working individuals and families. It is considered one of the most effective tools for lifting people out of poverty. The credit is “earned” because it is based on the individual’s or family’s earned income, such as wages or self-employment income.
Refundable Credit
The EITC is a refundable credit, meaning that if the credit amount exceeds the taxpayer’s federal income tax liability, the excess is refunded to the taxpayer.
Income Limits
Eligibility for the EITC is determined based on the taxpayer’s income and the number of qualifying children. There are income limits that vary depending on filing status and the number of qualifying children.
Qualifying Children
Taxpayers must have at least one qualifying child to be eligible for the EITC. A qualifying child generally must meet criteria such as age, relationship to the taxpayer, and residency.
Credit Amount
The amount of the EITC varies based on factors such as income, filing status, and the number of qualifying children. The credit is designed to provide more substantial support to families with more qualifying children.
EITC Assistant
The IRS provides an online tool called the EITC Assistant, which helps individuals determine if they qualify for the credit and estimates the amount they may receive.
Outreach and Awareness
The IRS and various organizations conduct outreach and awareness campaigns, such as EITC Awareness Day, to inform eligible taxpayers about the credit and encourage them to claim it.
Workers Who Can Claim The EITC
Workers at risk for overlooking this important credit can include taxpayers:
- Without children
- Living in non-traditional families, such as a grandparent raising a grandchild
- Whose earnings declined or whose marital or parental status changed
- With limited English language skills
- Who are members of the armed forces
- Living in rural areas
- Who are Native Americans
- With disabilities or who provide care for a disabled dependent
How To Claim The EITC
To get the EITC, workers must file a tax return and claim the credit, even if their earnings were below the filing requirement. Free tax preparation help is available online and through volunteer organizations.
Those eligible for the EITC have these options:
- Free File on IRS.gov. Free brand-name tax software is available that leads taxpayers through a question and answer format to help prepare the tax return and claim credits and deductions if they are eligible. Free File also provides online versions of IRS paper forms, an option called Free File Fillable Forms, best suited for taxpayers comfortable preparing their own returns.
- Free tax preparation sites. EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, use the search tool on IRS.gov, the IRS2Go smartphone application, or call toll-free 800-906-9887. Taxpayers should be sure to bring along all the required documents and information.
- Find a trusted tax professional. The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov. EITC recipients should be careful not to be duped by an unscrupulous return preparer.
The IRS reminds taxpayers to be sure they have valid Social Security numbers (SSN) for themselves, their spouse, if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.
Refunds
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with EITC or ACTC. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.
“Where’s My Refund?” on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by February 17. So EITC/ACTC filers will not see an update to their refund status for a few days after February 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the February 27 if they choose direct deposit and there are no other issues with their tax return. Check ‘Where’s My Refund?’ for a personalized refund date.
Avoid Errors
Taxpayers are responsible for the accuracy of their tax returns even if someone else prepares it for them. The EITC rules can be complicated and the IRS urges taxpayers to seek help to make sure they are eligible by visiting a free tax return preparation site or using Free File software or a paid tax professional. Errors can have a lasting impact on future eligibility to claim EITC and leave taxpayers with a penalty.
Taxpayers should be sure to reply promptly to any letter from the IRS requesting additional information about EITC and call the number on the IRS letter if they need assistance or have any questions.
Taxpayers who had an EITC claim reduced or denied for any reason other than a mathematical or clerical error must file Form 8862, Information to Claim Certain Credits after Disallowance, to claim the credit.
Beware Of EITC Scams
Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.
The EITC, or Earned Income Tax Credit, is really helpful for people with jobs and families to get some extra money, especially when it’s time to do taxes. Everyone should check to see if they can get the EITC or any other tax breaks when they fill out their tax forms.
Learn more at: www.irs.gov/eitc
